UK D&O Market Update

Introduction

This update analyses our observations on current market conditions for directors and officers insurance and the impact this has on board directors, non-executive directors and insurance buyers and is based on our observations of the market with our WTW clients and not on a review of the market as a whole. For ease of understanding, percentages have been presented as rounded figures.

Overview

Following significant rate cuts throughout 2023 and early 2024, median rates are no longer falling as sharply as they have over the past 3 years, which is in line with our expectations given the significant reductions that have already taken place.

However, our initial data for the first half of 2024 indicates that 72% of our clients who renewed in the second quarter saw their primary rates decrease or remain stable (further details can be found in Chart 6 in Appendix I). In the excess tiers, 82% of our clients received reductions or had their rates remain stable. Overall, median rates continue to trend downwards, which we attribute to continued competition between insurers. We have seen several situations where insurers have turned down certain accounts, either because rates have become too low or simply because some risks are outside their appetite. However, it is generally possible to replace those insurers with other insurers, meaning that rate reductions remain common, although in some countries it remains more difficult to find capacity. While new entrants have been minimal over the past year, there has been one significant new entrant who had a broad appetite, experienced underwriters and was looking to be commercial wherever possible, which has contributed to pressure on established markets.

We are also seeing increased interest in long-term agreements (“LTAs”) from some of our clients and some underwriters. This could be a sign of the level of competition in the market, so insurers are making attractive offers to secure business and avoid remarketing, but it may also be an indication that some policyholders want to lock in the soft market rates while they can.

Policy terms also continue to reflect the easing market, with insurers increasingly willing to write contracts with “any loss” limits, as well as other tailored coverage solutions. Many of our clients have been able to benefit from WTW’s proprietary D&O drafting, DARCstar 2023, ^{and we are seeing increasing interest in exploring the purchase of additional limits, particularly using WTW’s A-Star Side A DIC facility..}

The number of notifications continues to decline after peaks reached between 2017 and 2020 (see chart 2 below).

Looking ahead, we expect rates to continue to stabilize in the second half of the year.

Source: WTW FINEX FINMAR client placements data, as of 8 July 2024, see Appendix II for further details

Entire tower The average online rate has stabilized somewhat, but still shows an overall downward trend. For customers who saw declines, the average decline was 18%. See Chart 1 above.

Primary layer Online rate figures are in a similar position to Whole Tower. For those customers who saw decreases, the median decrease was 15%. See Chart 4 in Appendix I.

Notifications

While there was a small uptick in notifications in 2023 compared to 2022, it was still lower than the 2015-2021 figures. Given how 2024 started, if annualised, the number of notifications in 2024 may end up at the lowest level in the past decade. However, we caution that this could easily change as the year progresses.

Directors and Officers Survey Report 2024

Our largest director and executive survey report to date has been published (in collaboration with global law firm Clyde & Co LLP), with responses from over 900 directors, executives and risk managers from over 50 countries around the world. The report is accompanied by a series of articles that go into some of the detail, including regional overviews and discussions on specific topics such as ESG and insolvency.

You can find the 2024 Global Directors and Officers Survey Report and accompanying articles by clicking on the link.

If you have any topics you would like us to cover in our next survey, please contact us.

Appendix I: Additional Statistics

Source: WTW FINEX FINMAR client placements data, as of 8 July 2024, see Appendix II for further details

Source: WTW FINEX FINMAR client placements data, as of 8 July 2024, see Appendix II for further details

Source: WTW FINEX FINMAR client placements data, as of 8 July 2024, see Appendix II for further details

Appendix II: Methodology for statistics

The figures in this report are based on WTW FINEX FINMAR client placements as of 26 March 2024 and WTW client notifications for GB placements only, between 1 January 2007 and 31 December 2023. They will be updated periodically to reflect additional records. The charts in this report show the moving average between 2021 and Q1 2024.

An ABC placement is one that includes coverage for Side A (uncompensated D&O loss), Side B (compensated D&O loss) and Side C (company securities claims).