Management Liability & Financial Institutions
Insurers flexible despite emerging risks
We have now reached the halfway mark in 2024 and have witnessed some remarkable developments that could affect the Directors’ and Officers’ (D&O) space: persisting concerns around the use of artificial intelligence (AI), political tension surrounding general elections, regulatory reform, and a record number of insolvencies as a result of high interest rates, inflation, and energy costs. Despite this, insurer markets have shown their willingness and flexibility through increases to capacity and competitive premium pricing. Likewise, the financial institutions (FI) sector remains stable and competitive with capacity still very strong.
Changes in policy terms and conditions
Tokio Marine HCC has new appetite for standalone Crime Insurance on a co-insurance or excess basis. IQUW is now offering standalone Crime and has introduced a new Financial Lines product, FortFI. Edge’s commercial D&O capacity has now increased to a GBP/USD/EUR 10m limit. Newline Side A Consortium can offer limits up to USD/AUD/CAD 25m and GBP 20m in the Commercial and FI D&O space for risks worldwide.
Underwriting changes
There have been no notable new entrants to the market in the past six months. With regards to senior management changes, Samantha Shean has joined Aviva as Head of FI, moving from her position as Head of FI at Axis. Lauren Wigney, who previously worked at Marsh, has moved to Aspen. Meanwhile, Andrew Hopper has left his position as Head of FI at CV Starr to join Berkshire Hathaway.
Notable claims
Claims notifications remain steady in terms of volume with no discernible major trends. Crime claims continue to come through both for traditional theft and social engineering losses. Insurers are still concerned about a potential uptick in losses resulting from data breaches, ESG, regulatory enforcements/investigations and securities class actions.
Geographic/sector differences
UK markets competing against domestic markets in the US, Canada and Australia continue to feel the pressure of further decreases being offered locally. In Australia in particular, the UK is struggling to compete with some of the price drop offs in the commercial space. However, capacity remains strong and broad marketing efforts and continued appetite for new business means London remains a competitive option for multinational insureds.
New solutions
We are launching our Lockton Side A Facility (APEX) in September 2024. This is a bespoke Lockton product designed to compete with other market leading Side A forms. Please reach out to the team for more information.
Claims notifications remain steady in terms of volume with no discernible major trends.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Market capacity remains strong with numerous underwriters targeting growth. This is creating a competitive pricing environment. Rates to fluctuate depending on territories.
Expected capacity change in the next 6 months for claims-free portfolios
There are no signs of any change in capacity in the months ahead, but we would not rule out the entry of new managing general agents (MGAs) into the market
Expected coverage change in the next 6 months for claims-free portfolios
We may see more scrutiny on Cyber coverage in both errors & omissions (E&O) and D&O lines of business as a reaction to some claims working their way through the market. Underwriters are also trying find other ways to compete other than reducing premium which has enabled us to obtain long term agreements (LTAs) or no claims bonuses (NCBs) for some insureds.
Emerging risks
There are several emerging risks affecting the D&O space: how firms use and implement AI tools continues to attract scrutiny, with concerns around regulatory compliance, reputational considerations, and cyber risks. In the UK, a change of government is likely to lead to regulatory changes in the months ahead and insurers are watching this space closely. The US election later this year could also bring a wide range of outcomes for D&O risks depending on the outcome. At the same time, signs of economic growth may begin to alleviate pressure on boards in certain industries.
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