NU Online News Service, April 23, 2:36 p.m. EDT
Over the last three months, London market insurers reported an average premium reduction of eight percent on renewal business for the commercial sector's directors and officers liability insurance, according to Willis Group Holdings.
The brokerage said the D&O market is expected to continue softening in the second quarter of 2009, with insurers predicting reductions in excess of six percent, in stark contrast to the D&O rates for financial institutions where rates are hardening.
Willis said its D&O Index–a quarterly survey from, Willis' Financial, Executive Risk and Professional Liability (FINEX) Global business–asked more than 90 percent of D&O insurers from Lloyd's and the London company market to comment on premium rates and coverage terms for the preceding three months and to make projections for the next three months.
In a statement on the survey's findings, Julian Martin, executive director of Willis FINEX Global, said, "The commercial sector continues to benefit from a lower claims environment than the financial institutions sector, with rates continuing to soften, albeit at a much slower rate than last year."
He said further that, "The anticipated hardening of rates for reinsurance treaties at the year end was less severe than expected, and combined with new entrants to the market, capacity for commercial risks continues to be strong."
Mr. Martin said competition for good risks remains intense and clients seeking flat or reduced premiums and broad coverage terms must undergo a thorough risk-profile analysis before renewal.
Willis said the insurers surveyed believe that claims activity will eventually increase because of the current economic crisis as well as the portfolio convergence for insurers that provide both commercial and financial institution coverage.
However, the brokerage said, for now, commercial D&O remains a buyers market where broad cover and higher limits are still available at an attractive price.
Commenting on the hardening market for Financial Institutions D&O, David Purdy, executive director of Willis FINEX in London said, "Buyers are concerned over the financial security and ratings downgrades for a number of key players in the D&O market.
"Further insurer downgrades could lead to capacity problems and we are advising our clients to go to the market earlier at their next renewal and be watchful for attempts by underwriters to reduce coverage," he concluded
The key findings in the survey were presented recently at a D&O seminar that Willis hosted for the Norwegian Risk Managers Association.
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