Directors & Officers Insurance Market Insights – March 2020

State of the market context and solution-based approach

As we enter 2020, the directors and officers (D&O) insurance market for Australian insureds remains heavily focused on implementing pricing and deductible strategies in response to the challenging and evolving claims environment.

• While losses arising from securities claims against organisations continue to impair insurers’ profitability and appetite for participation on listed D&O liability insurance programmes, insurer appetite remains strong for the provision of cover to protect directors and officers personally from claims brought against them.
• Whilst listed companies purchasing insurance inclusive of coverage for securities entity claims (commonly called “ABC” coverage) have been most harshly impacted, premiums are also increasing for listed non-purchasers of securities entity coverage (commonly called “AB” coverage), and non-listed organisations.
• Insurers will continue to progressively monitor the profitability of their portfolios and the perceived success of their current strategies and adjust the cost and availability of their capacity accordingly.
• It will be essential for listed companies to work with their broker to differentiate their company’s risk profile from its peers, through direct engagement and storytelling to provide colour and insight into the organisations performance, culture, and management of its continuous disclosure obligations.
• As an industry, in the medium to longer term we must be aiming for a global approach to addressing the significant challenges impacting the D&O insurance marketplace, a smoothing out of risk to offset the current pricing dynamics and ultimately driving more predictable and sustainable solutions for the benefit of our clients.

It is in our interests as an industry to find solutions to address the current market challenges that continue to have a wide-reaching impact on business in Australia.

Aon will actively advocate for our clients – we will ensure that our clients’ differentiated risk profiles are understood by the market, we will leverage our overall market position and portfolio with insurers and we will deliver access to capital unique to Aon through broking innovations such as the Aon Client Treaty.