A softening of the pricing curve is being observed, but the outlook remains uncertain for UK D&Os - Gallagher
For the directors and officers (D&O) market it is the first renewal season where risk and insurance managers are negotiating based on terms and conditions that were bound during the pandemic. Whilst it is not yet possible to completely ignore the continued uncertainty, the market is ready to move on from COVID-19, concludes Gallagher in its state of the market report.
For the UK market, managing director David Ritchie notes there remains much uncertainty for UK companies and their directors. Brexit is still a key driver of turmoil, with “sausage wars” breaking out and further upset to free trade adding to woes felt at the border.
Experience so far this year suggests the market is at the top of the pricing bell curve, with new excess market capacity applying some much-needed relief to overall pricing.
”Whilst primary policies remain difficult to replace or move, some primary insurers still need to take corrective measures, the appetite to compete for excess Plc business is clear to see,” observers Ritchie, adding that “insurers need to be ready to compete for their existing business, on accounts where the rate has been corrected through an unprecedented year”.
As furlough schemes lift, the fallout will start to be felt, he warns. “As we have learned from the last soft market, not just in the UK, but in many developed nations, the tail for D&O claims is a long one.”
“As we have stressed before, a quiet accident year (in terms of notifications) coupled with historic rate increases for insurers does not necessarily equate to a profitable return, and this long tail nature of D&O claims means payments for historic investigations (as far back as 2013) are still being made.”
”Coupled with impending changes to audit reforms and the turbulence caused by UK IPOs and SPACs/De-SPACs – the outlook remains uncertain for the UK economy and its company directors.”