The low down on D&O, 2005

A recent survey by the Tillinghast unit of Towers Perrin revealed that directors at almost half of all public companies polled were inquiring about their directors and officers liability coverage in 2005; scrutiny which incited changes to the coverage at 19% of the corporations in question.
Elissa Sirovatka, a principal at Tillinghast, says that D&O coverage being included in the personal assets in settlements such as Enron and WorldCom increased the amount of inquiries from boards. “Board members now recognize their accountability and are questioning their own levels of coverage,” Sirovatka says.
Most of the 2,694 individuals surveyed reported that 2005 has not resulted in any changes in their policy limits. However, on average, limits for U.S. profitable companies increased in 2005 to US$14.3 million from $13.6 million in 2004, according to the ‘2005 Directors and Officers Liability Survey.’
The survey also indicates that public companies also reported a significant claim susceptibility growth. Susceptibility increased from 27% in 2004 to 35% in 2005, the survey suggests. Claim susceptibility grew to 19% in 2005 from 15% in 2004 for all individuals involved in the ‘for-profit’ study. However, the claim susceptibility for non-profit participants only rose by a marginal amount from 5% in 2004 to 6% in 2005.
All profitable companies that participated in the study report that their claim frequency (the number of claims filed against each participant on average) did not change significantly 0.34 in 2005. However, non-profit participants report that their claim frequency rose an average of 1.53 in 2005 from 1.34 in 2004.
The survey also reports that 37% paid lower premiums in 2005 and that 37% paid higher premiums in 2005 while the remaining 26% reported no change in premiums paid. The cost of excess coverage dropped 10% and the cost of primary coverage fell 8% among those that paid less, according to the Tillinghast survey.
All but 49 Canadian participants of the survey are based in the U.S. with 791 being publicly held and 1,370 being privately held. Of the total participants, 533 are nonprofit organizations.