Increasing underwriting challenges in D&O insurance

The full report, “U.S. Director and Officers Liability Market Update,” is available at  www.fitchratings.comUnderwriters face increased challenges in properly pricing D&O insurance as the number of potential claims increases. (Photo: Thinkstock)

A highly competitive market pricing environment along with a shifting claims landscape is having an adverse effect for many professional liability underwriters, particularly in Directors & Officers (D&O) liability insurance.

Though representing only 1% of total industry direct premiums, D&O insurance comes with a notoriety that belies its size. Sizeable D&O claims arise from events such as corporate insolvencies, large stock price declines, financial reporting irregularities or regulatory investigations. D&O insurance is intended to cover the directors and officers of an organization against allegations of negligence, misleading statements or wrongful acts that lead to litigation. Leading underwriters in the D&O insurance segment include AIG, Chubb Limited and XL Group Ltd.