What you should know about the D&O Market in 2019

In review, there is plenty of noteworthy data available to forecast for the state of the D&O marketplace in 2019. 2017 was a year in flux, but 2018 began to turn the corner into a market with dramatically more underwriting discipline and backbone than anything we have seen in the previous 10 years outside of the financial and home building sectors post the 2008 financial crisis. 

The thoughts that stand out are the following: 1) an influx of plaintiff attorneys that are focused on operational and event-based claims will continue to rise and have an impact that was last felt during the 1990s; 2) D&O claim activity will include more claims against medium-sized public companies, cases dismissed more often, higher relative settlements, and higher defense costs connected to the smaller settlements; 3) merger-objection claims will continue to be brought to federal courts and the overall cost will continue to rise as well. Carriers will respond to these developments with demands for higher premiums in order to address the balance of their underwriting business, and we must be prepared. 

In reaction to these factors, we see insurance carriers pointing to adverse trends such as the rise of federal filings, and pushing premium increases across the board.

For the first time since 2003, some attention will be given to whether key excess layers have sufficient pricing to support claims activity that is climbing into layers previously believed to be safe. Newer D&O market entrants from 3 to 5 years ago are no longer intent on disrupting long-term relationships, but rather looking to hold onto gains they may have made and proceed more cautiously, or even conserve capacity in some cases.

In other words, the D&O marketplace in 2019 will be looking for profitability instead of market share. 

Price changes so far in the D&O world per the Council of Independent Agents and Brokers (CIAB) are minimal but noticeable, and will most likely continue to increase. 

Original article by Phil Norton, PH.D. - Arthur J. Gallagher