How Has COVID-19 Reshaped D&O Insurance?

D&O Insurance

In a tightening D&O market, more than 90 percent of D&O insurance policyholders experienced rate increases in the third quarter of 2020. Both public and private company marketplace continue to see premium and retention increases, with COVID-19 only lending to its hastened pace and change.

With public companies, significant premium increases that took place in the last half of 2019 have yet to subside in 2020, and no change is expected to be coming soon. On the contrary, multiple reports show an acceleration of the D&O insurance marketplace. But even though COVID-19 has caused significant disruption in the space, a hardening of this caliber was to be expected in recent years.

The D&O market was firming back in 2017 before accelerating in 2019, especially in the second half of that year for publicly traded companies. Heading into this year, the theme was expected to continue on its own but was bolstered by the ongoing pandemic.

The changes that brought acceleration to the hardening market last year was due to several factors, including:

  • Oversupply of Capacity: Up until 2018, the market saw more than a decade of softening rates and broad coverage. This made the D&O space a soft market. Usually, soft markets would last for around five to seven years, but the last soft market lingered past a decade.
  • Increase in D&O Claims: While the market was coming out of a soft space, claims activity accelerated into an unprecedented territory as US securities class actions against companies grew.
  • Shifting Market Appetite: Since D&O insurance coverage is a longtail business, meaning companies realize significant profits by selling low volumes of highly sought-after products, markets don’t start to pay out on claims until years into the period after a policy ends. That means that claims filed more than a few years ago has only begun to be paid out recently.

Now, heading into nearly one year of COVID-19 living in the United States, the marketplace, both nationally and locally, like with Orlando D&O Insurance providers, is only more disrupted. The pandemic has brought about several D&O-related impacts, including pressuring the economy and public companies to deal with their disclosures around the pandemic, demonstrating how they’re responding and how their business performs.

The block of expected litigation stemming from COVID-19 has already started to present itself. Since the coronavirus pandemic began to spread rapidly in the United States, there have been nearly 20 COVID-19-related securities class action lawsuits. And while the trend for class action lawsuits is trending downwards, it’s still well above the historical average.

About The Hilb Group

Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients to make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.