A study released by Tillinghast – Towers Perrin based on a survey of U.S. and Canadian corporations on the purchase of directors’ and officers’ (D&O) insurance indicates that pricing rose on average by 30% for 2003 covers despite an overall abatement in claims frequency and severity for last year. Even with the steep rise in pricing, which follows a similar hike applied by insurers last year, the purchase of D&O cover remained high, with 97% of the U.S. survey respondents and 90% of the Canadian respondents having secured coverage. The study cites ongoing insurer concern over high-profile bankruptcies and corporate scandals as being the prime drivers behind the price increases of D&O covers. There is heightened concern with regard to securities and shareholder litigation, the study notes. While average claims frequency and severity appears to have stabilized, there was a 30% year-on-year rise for 2003 in shareholder claims severity. The average indemnity paid for shareholder claims increased to $23.3 million for this year compared with an average of $17.1 million for last year, and $9.6 million for 2001, the study shows. “In light of recent events, a dramatic surge in premiums is not really that surprising. Declining stocks on Wall Street and the unprecedented, large corporate scandals that have plagued businesses over the past year were clearly the main drivers of the rate increases. Until we see some improvement in the stock market and shareholders believe that good corporate governance has taken hold, we can expect to see this [D&O price] trend continue into 2003 and possibly beyond,” says Mark Larsen, a survey leader at Tillinghast.