U.S. Public D&O Insurance Market

Last December we analyzed the U.S. Public D&O insurance market, using price changes by size of insured, by outcome and by attachment band, Schedule P analysis, loss ratio analysis and large loss analysis. We identified a “volatile, boom-and-bust market untethered from empirical data and unhindered by logic”.

Unfortunately, not enough has changed since then. Insurance prices continue to drop across all segments as established and new capacity seeks to buy its way onto fiercely defended programs. As a result, current prices remain incompatible with long term profitability.

We separate Financial Institutions and sub-divide Commercial by insured company size and attachment point:

We exclude IPO/SPAC/deSPACs (where identifiable) to prevent large-premium items from skewing the results.

We focus on price rather than rate to exclude (untrackable) changes in coverage.

Our ‘pure price’ analysis excludes loss trends (so ‘flat’ is negative in real terms).

Our analysis is based on ~40,000 commercial policies.

A. QUARTERLY CHANGE SINCE Q1 2022

We start with a look at the market from its most recent peak.

All layers are only just more than a third of their early 2022 price, reflecting the intense competition, while high attaching are likely already at minimum premiums.

Financial institution prices are moving in the same direction, although not as severely.

B. ANNUAL CHANGE, BY SIZE OF INSURED, SINCE 2013

As you would expect, working layer prices have held firmer than high attaching layer prices overall.

However, small cap working layer prices have dropped more than mid-excess.

High attaching layers for commercial midcaps are now almost exactly where they were in 2013. Has nothing really changed since then?

At least the working layers for large commercials show some price resilience, because they are the most frequently impacted by loss activity.

Financial institution pricing has been the least volatile, but 81.7% of 2013 prices for high attaching layers is a concern.

C. QUARTERLY CHANGE, BY OUTCOME

We separated ~40,000 policies by whether they renewed flat, price up or price down:

Since mid-2021, “10% off expiring” has become normalized, creating a negative feedback loop. While price reductions outnumber increases, sustainable profits will remain elusive. Our chart shows what we all know – that markets can move quickly, in both directions.

Half-way through 2024 and most of the 2020-2022 increases have been given back, leaving the overall market on an unsustainable trajectory.

On the upside, we see early signs of a turning tide. Insurers have started to resist (unwarranted) premium reduction requests. ‘As is’ renewals are the first, fragile signs of a transition as underwriters hold strong against insured/broker pressure. That trickle needs to become the trend.

When you’re in a ditch, stop digging.