January 2023 Market Update – Directors & Officers Liability

As foreshadowed in our July 2022 D&O market update, we have experienced a return of capacity across the class. The return in competition has, in some cases, lead to premium reductions of up to 20 per cent, particularly across small publicly traded and large privately held companies. Construction is the major caveat, with claims activity and trends causing insurers to remain cautious when writing risk in that industry.

There are otherwise more general regulatory developments, trends and litigation which we feel may impact boards and insurers, and that could mean that the softening conditions now being experienced, are short lived. We traverse these issues in our 8 November 2022 article “D&O class action trends in 2022“.

Trends currently impacting boards and insurers include:

Staff shortages and increases in wages are already having a significant impact on a lot of industries and this trend will continue through FY2023.

Inflationary pressure - 5.1% last quarters and expected to be over 7% by the end of 2022.

The above issues are contributing to financial constraints being imposed on SMEs increasing the likelihood and prevalence of insolvencies.

The impact of COVID-19 on working habits including increased prevalence of working from home has increased obligations for employers and exposure to new types of EPL claims.

Impact of low unemployment rate resulting in staff shortages for business impacting output.

Statutory liability (particularly OH&S Costs) continues to see activity in construction space.

Our recent articles that address the above may be found here. For our product fundamentals series across directors’ and officers’ liability products see here. For commercial D&O; and for management liability see here; and for the difference between management liability and commercial D&O see our article here. Our market update on management liability can be found in the directory below.