The Hard Market for D&O Continues as Carrier Concerns Remain

Our forecast for the state of the D&O marketplace in 2020 is initially “more of the same”. This past year saw consistent price increases across the board from 3% near the beginning of the year to an average of 30% or more toward the end of 2019. In addition to price increases, most carriers also cut the capacity they deployed – writing smaller limits and enforcing higher deductibles as well.

The market segments hit much worse than average were life sciences, pharmaceuticals and biotech accounts. Technology in general saw very large increases (especially software companies), as did newer companies with only a brief interlude since an IPO and reverse flow accounts (corporations operating mainly in the US but domiciled outside of the US). On the brighter side, financial institutions typically did much better than these averages, for the most part because they already had significant premium increases during the financial crisis. REITs were a most favored class of business, thanks in large part to fewer large losses historically.

Our expectations as signaled by many of the insurance company executives is for large increases throughout all of 2020, but we also dare to say that the second half of the year in 2020 will not be as bad as the second half of 2019. Why? Because a) most carriers will have reduced their loss ratios substantially by then, and b) carriers will give consideration to the fact that the largest increases for 2019 were taken in the second half of that year, and finally c) new or renewed capacity may return to the marketplace by then.

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