HRH: D&O Insurance Stable In ?05

By Mark E. Ruquet

NU Online News Service, Dec. 29, 11:39 p.m.EST?Directors and officers liability insurance premiumsshould remain stable overall for 2005, but buyers will finddifficulty in some markets, according to a report released by Hilb,Rogal & Hobbs.[@@]

The report, "D&O Liability Snapshot and Insurance MarketForecast 2005," said that 2005 will see greater stability in themarket.

The market will continue to see competition surrounding betterrisks as it has experienced through 2004. However, a shift inattitude among key underwriters of D&O insurance could spellfewer rate reductions for policyholders over the coming year, HRHadded.

The report was authored by Fred T. Podolsky, executive vicepresident of HRH of New York and managing director of the executiverisk solutions practice, along with Susanne Murray, executive vicepresident of HRH of New York and the D&O practice leader of theexecutive risk solutions practice.

In the report, the authors note that settlement values on somehigh-profile cases have been higher than expected, and oneinsurer?which went unnamed--has issued an internal directive tounderwriters to maintain rates or walk away from the risk.

Aggressive enforcement actions on the part of regulators andattorneys general is increasing the need for "Side A" individualcoverage among directors and officers to protect themselves where acorporation's liability policies are insufficient, which isaffecting demand, HRH noted. These market realities present "uniqueunderwriting challenges for D&O insurers," the authorssaid.

On a cautionary note, the authors said the D&O marketplace"appears increasingly fragile to excessive swings in pricing due toan expanding litigious environment, an increasing number ofmega-settlements and fragile reinsurance support." They added thatthe aggressive premium cutting seen in 2004 would not continue.

The report points out that among the markets that insurers seeas less favorable will be financial institutions, healthcare andsome technology companies.

In a telephone interview with National Underwriter, Mr.Podolsky said the annual report is targeted at risk managers andgeneral counsels making D&O insurance buying decisions to givethem some guidance.

"It is difficult to tell the future," he noted, pointing outthat the latter part of the D&O market in 2004 differed fromHRH's forecast in its level of competition, and that pricing didnot drop as much as anticipated.

Some of the reasons for the stability in the D&O market, henoted, were the opening of excess capacity, new competition, andinsurer aggressiveness for some accounts.

He also noted a "dramatically" expanding need for D&Oinsurance as more and more middle-market, publicly-owned companiesseek coverage protection in the face of increased litigation andregulation.

A link to the report from the Richmond, Va.-based insurancebrokerage firm is available at www.hrh.com/HRH_D&O_Forecast.pdf.