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Risk in Context

Getting the Most from Your D&O Renewal

Posted by Sarah Downey September 13, 2018

The record number of securities class action filings seen in 2017, a trend that is persisting in 2018, is one of the factors contributing to a shift in the directors and officers (D&O) liability insurance market. After years of benefiting from a soft market with declining rates, buyers are now seeing slight to modest rate increases in addition to a more challenging claims environment. Still, there are opportunities to secure rate decreases, thanks in part to competition from newer players looking to expand their presence in the space.

Securing the best rates requires careful planning, including potentially marketing your D&O program. Regardless of whether you decide to market your program, given the current litigation environment, you should be prepared for your upcoming underwriting meetings. Here are three considerations that may help to better position your organization during your next renewal.

Prepare In Advance

Demonstrating awareness of risks and preparedness to protect your company could help when it comes time to negotiate terms and pricing. Decide whether it’s appropriate to market your D&O program and be prepared to discuss your company’s areas of exposure and the actions the company is taking to address them.  That includes being ready to answer questions about your company’s cyber protections and employment-related procedures — topics that haven’t often come up during D&O renewals in the past.

If you suspect a challenging renewal process, consider whether it is best to hold in-person meetings with underwriters. This is especially relevant if you are working with blockchain technology or digital assets, an area in which underwriters’ understanding and comfort-level continue to evolve.

Explore New Partnerships

Moving carriers might be necessary in order to avoid or mitigate premium increases and be in a position to push for decreases. In making that decision, however, you should carefully weigh the potential for cost savings against the benefits of continuing to build long-term relationships with your current insurers. Additionally, make sure that you understand the claims reputation of the insurers you’re considering adding to your D&O program — this will be of the utmost importance in the event of a loss.

Analyze Your Coverage Options

Buyers can generally use competition in the insurance market to their advantage. Especially with newer players that are trying to expand their offerings in this space, you might be able to negotiate better coverage and pricing terms. For example, multiyear coverage might be available, which would allow you to lock in favorable rates over an extended time period.  Certain carriers might also be more willing to negotiate policy wording if they have a real desire to be part of your program.

In addition to these three considerations, make sure you keep an open dialogue with your insurers throughout the year so that they can better understand any changes to your risk profile and offer you the right coverage options at the time of renewal.

Sarah Downey