D&O Rates on the Rise as Clients Ask More Coverage Questions

Directors and officers are asking more about their insurance coverage—and are being charged more for it, according to a survey by Towers Watson. 

After all, the worries of directors and officers are shared by insurance carriers offering coverage to them to protect against a “much wider range of claimants than in past years,” Larry Racioppo, vice president of Towers Watson's executive liability group, says in a statement. 

Forty-one percent of private/nonprofits reported an increase in D&O premiums in 2012, according to the survey. Nearly 30 percent of public companies said the same for 2012. 

“Increasing D&O and employment litigation, coupled with inadequate pricing and retentions in the private and nonprofit [D&O] space, are all driving insurers' need for pricing increases,” Racioppo adds. 

Many directors and officers are asking about coverage in 2012. Towers Watson says 70 percent of private/nonprofit companies received inquiries from directors and officers about the amount and scope of the organization's D&O coverage. That's a 12 percent increase over the prior year.

Towers Watson says 325 D&O insurance buyers—a majority of which were large organizations with assets of more than $1 billion—participated in the survey. About 60 percent are public companies.

The top three D&O concerns among survey respondents are regulatory claims, direct shareholder/investor suits, and derivative shareholder/investor suits. 

“The increased concern over regulatory litigation may reflect new laws put in place since the financial crisis, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as an increase in whistleblower bounties,” says Racioppo. 

Of the pool surveyed, 36 percent reported D&O claims in the last 10 years, with a majority—63 percent—of nonprofit organizations reporting a claim within that span.