Competition is overcoming a need for rate increases and policytightening among providers of directors' and officers' policies forprivate companies and nonprofits, say experts.

Greg Flood, president of Ironshore's IronPro unit, says duringAdvisen's Management Liability Insights Conference in New York,that D&O policies for private companies and nonprofits are “sobroad you can drive a truck through them.”

In fact the policies are so broad that “claims don't fall into atrend,” says Shelley Norman, head of private and nonprofitmanagement liability for Chartis in the U.S. and Canada.

“They [claims] come from everywhere,” she adds.

Carriers that once flocked to private and nonprofit D&O asan oasis from the losses in public-company D&O are starting tofeel the hurt from claims brought by squabbling families,employees, majority shareholders, customers and competitorsalleging such things as misappropriation of funds, lack offiduciary duty, retaliation and discrimination, and negligence andfraud.

Nonprofits are furthermore subject to heightened regulation andattorneys general looking to make a reputation, adds Norman.

“A lot of folks did not appreciate the severity [of private andnonprofit D&O],” says Bruce Simmons, vice president and productmanager for XL Group's private commercial management liabilitysector.

Simmons says he does not think the insurance line is gettingadequate rates despite some scattered reports of low single-digitrate increases in some jurisdictions. Buyers are finding lowerrates if they shop around rather than renew, according to studiesby Advisen.

With low interest rates, carriers are barely making money with aloss ratio of 65, says Flood, who offers, “I'm interested to seehow companies pressure underwriting.”

“Margins are thin,” adds Simmons. “You can't mess up[underwriting].”

And underwriting may only get tougher. Statistics show a largeportion of the potential private and nonprofit marketplace—maybe 75percent—does not purchase D&O coverage. Those not buying aretypically small private companies and nonprofits, each withdifferent risk as well as various motivators for making thepurchase.

These buyers also have limited resources and finances.Commissions on these policies may not be high—getting them on thebooks can be challenging, says Norman, who adds that—despite thewide recognition that policies are broad and rates could behigher—it's unlikely anyone will do anything drastic about it.

“It's a hard marketplace to exclude—it's a competitive market,”she says.

The market will not scale back terms. Instead, it willconcentrate on price, Flood opines.