Aon: Fourth-Quarter D&O Prices Up Nearly 10%

The price for Directors and Officers insurance experienced the first year-over-year quarterly increase since the credit crisis, according to broker Aon's Financial Services Group.

A quarterly pricing report from the executive liability division of Aon says 2012 fourth-quarter D&O prices increased 9.9 percent over the same period in 2011.

Looking specifically at programs that renewed in the fourth quarter in 2012 and 2011, price increased 3.2 percent.

This comparison is the best indication of pricing trends since D&O policies are typically written for a 12-month period.

But the report also includes a consecutive quarter-over-quarter comparison. The average price per $1 million of D&O coverage during the 2012 fourth quarter increased 20.5 percent compared to the prior quarter, says Aon.

Throughout the year, the number of companies receiving a price decrease for D&O coverage at the primary layer steadily declined—from 38 percent in the 2012 first quarter to 11 percent in the fourth quarter.

“The carriers that are not pursuing rate increases on a primary basis are in the minority,” says the report from Aon.

More than three-quarters of companies faced an increase in price in the 2012 fourth quarter, compared to 27 percent during the first three months of the year.

Aon points out that 94 percent of all primary placements renewed with the same carrier.

“The average [price] change for those primary policies that remained with the same carrier was 7.7 percent,” Aon reports.

Aon also observes that clients bought 3.7 percent more limits in the 2012 fourth quarter, compared to the same time the year before—and deductibles for 16.8 percent of D&O programs increased during the fourth quarter.

“The decision to take the higher deductible in [2012 fourth quarter] appears to have been a mechanism to mitigate what would have otherwise likely been a more significant premium increase.”