"Maintaining diligence in all aspects of portfolio management" will be essential for D&O insurance brokers in 2024. (Credit: Good Studio/Adobe Stock)
One the heels of the recent A.M. Best alert signaling a negative outlook for the Directors and Officers (D&O) insurance market, Fitch Ratings released a report this week saying that the segment's favorable underwriting performance over the past few years is "likely unsustainable."
"Given heightened competition, softening market conditions are anticipated to prevail for the third consecutive year in 2024," Fitch Ratings said in a recent statement. "Aon's D&O market survey indicates that D&O primary renewal rates dropped in the last seven consecutive quarters. Pricing pressure remains more pronounced in higher-layer and excess business given abundant underwriting capacity."
Direct written premium (DWP) volume is likely to continue to decline in 2024, Fitch Ratings added: "In response to poorer 2017-2020 market performance, industry direct written premiums (DWP) expanded by 134% from 2018-2021. However, a return to operating success has fostered a shift in pricing momentum, leading to a 23% DWP decline from 2021-2023 to $11.5 billion."
This analysis mirrors recent comments from Zurich North America's head of Management Liability during the 2024 PLUS D&O Symposium in New York. D&O insurance premiums have hit a nine-year low, Brian Mastellone, head of Management Liability — Public for Zurich North America, shared during the event.
"I think it's important for all of us to educate clients and brokers about how the D&O claim environment is evolving and the importance of rate stability so we do not get to a place where the rates seem to move up significantly overnight," said Mastellone, who added that increased claims severity, changes to reinsurer appetite and insurance company consolidation are all trends impacting the D&O market.
Mastellone added that "maintaining diligence in all aspects of portfolio management" will be essential to managing D&O clients going forward. To that end, corporate board members are well-advised to study and digest the details and limitations of their coverage.
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