NU Online News Service, Sept. 9, 3:52 p.m. EDT
Commercial insurance buyers are showing growing interest in liability protection for directors and officers of a company who are not indemnified by their organization, a Towers Perrin survey finds.
But while popularity of what is known as Side A coverage continues to grow, the firm found independent director liability coverage draws little interest.
The information was contained in the Towers Perrin release of its 31st Directors and Officers Liability survey of purchasing trends for 2008. The Stamford, Conn.-based consulting firm said it received responses from 2,599 participants, an 11 percent decrease from the 2007 survey, the firm said.
Tower Perrin's poll found a 33 percent increase in the number of purchasers of Side A only coverage by repeat public company survey participants. This raised the total percentage of public companies who say they are buying the coverage to 43 percent.
Few private companies purchase Side A only coverage, a total of 1 percent, according to the survey. Only one nonprofit of 343 participants said they purchase the coverage.
Organizations with assets over $10 billion were the largest purchasers of the coverage, a total of 73 percent. However, many of these organizations also purchased Side B or C coverage (which cover the company itself), with 15 percent purchasing only Side A and not the other two coverages.
On IDL coverage, which Towers Perrin said is similar to Side A coverage, but only covers outside directors, only 1 percent of public companies said they purchase this policy. In the 2007 survey, Towers Perrin reported that 30 percent of private companies and 21 percent of public companies said they were considering buying, but none had.
For those purchasers of Side A only that also purchase Side A, B and C policies, the limit stood at $12 million, compared to $13.1 million in 2007.
The average rate per $1 million limit for Side A, B and C coverage was $16,624 in 2008, down from $21,422 in 2007. The average rate per $1 million limit for Side A was $15,638, up from $11,015 in 2007.
Of the 56 percent of survey participants who have international operations, 98 percent said they were relying on global coverage being extended from their D&O policies purchased in the United States. Less than 2 percent purchased a separate policy.
The report also noted that 45 percent of respondents reported purchasing fiduciary coverage, up from 37 percent in the 2007 survey. Towers Perrin said roughly half bought shared limits with their D&O policy, while the other half purchase stand-alone coverage, consistent with prior surveys.
Copies of the 62-page survey results are available at www.towersperrin.com.
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