A consistent theme running through our blogs on the subject of directors’ and officers’ liability insurance (D&O) has been the disconnect between non-executive directors as key end users of these policies and those responsible within the company for buying this insurance. This can lead to uncertainty and confusion in the event of a claim.

We do not suggest that the remedy for this is for non-execs to go into the market and purchase their own individual policies. (Although such products are available, they are perhaps more prudently regarded as last resort protection.)

Instead, we think there is much to be said for non-execs putting themselves in a position in which they can have an informed debate on the topic with those in the company who hold the purse strings.

With this in mind, here are our 2022 predictions for the D&O insurance market. They will help you evaluate the protections you want to have in place.

LESS RATE CHAOS/INCREASED RATE STABILITY. Meaningful premium decreases are increasingly possible. For certain risks, having the right strategy and broker advocate in place can help obtain premium decreases on D&O programmes. From initial public offering renewals to more traditional programmes, we are seeing improvements in terms and pricing offered in the marketplace.
NEW ENTRANTS GENERATE POSITIVE COMPETITION. New entrants into the D&O liability marketplace are expanding appetites and will continue to drive positive competition, pushing incumbent and legacy insurers to sharpen their pencils and offering clients more choice and flexibility in a stressed market.
FOCUS ON KEY ELEMENTS OF COVER. Increased focus on the key elements of D&O cover and the jettisoning of “nice to haves” of questionable value will lead to more streamlined and transparent cover.
CHANGING DEMANDS FROM INSURERSIN THE FACE OF AN EVOLVING CLAIMS LANDSCAPE. We expect to see continued development of new areas of interest from insurers, including a sharp focus on issues such as ESG and new emerging risks that are giving rise to claims including cyber-related D&O claims.
INVESTING TIME WILL DELIVER REWARDS. Companies with a good story to tell who are willing to invest time and effort at senior executive level in differentiating their risk profiles should be able to secure favourable renewal terms from the D&O market.
NARROWING THE GAP. The gap between D&O insurance as a product and its end users, the directors and officers themselves, should continue to narrow as boards take greater interest in and responsibility for their own personal liability protection against a background of increasing cost and litigation risk.

In our experience, the key to a successful outcome at D&O renewal in what remains a challenging market is to agree priorities and plan appropriate buying strategies in order to achieve goals through positive risk profile differentiation and market selection. The more non-execs can be consulted in this process, the more likely it is the cover will be appropriate to them and that the scope for uncertainty and confusion in the event of a claim will be reduced.

Related post: D&O insurance co-event (educational session for NEDs and board members to understand their D&O cover)

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