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3 Things that Matter in the Changing D&O Market

In an uncertain environment, here’s what agents should focus on when helping clients find the right directors & officers liability insurance coverage.
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3 things that matter in the changing d&o market

In an unfamiliar business environment where costs have been going up dramatically, companies are looking for ways to not only manage their insurance costs, but to ensure they have the coverage they need. And while uncertainty prevails around the lingering impact of the coronavirus pandemic on the economy, agents are in a prime position to assist clients in purchasing the right directors & officers liability insurance coverage. 

“With the emergence of the COVID-19 pandemic and resultant economic concerns, many markets continued to implement remediation efforts to their portfolios or have sought to mitigate their overall risk to the uncertainty presented by the COVID-19 outbreak," says Eric Senatore, senior vice president, commercial management liability, Sompo International.

And as companies reopen and bring their operations back to some level of normalcy, concern lingers around what challenges companies may encounter as they do so.

“Given the current challenges and the uncertainties in the supply chain, inflation, taxes and the regulatory environment, there is a heightened potential for missteps and missed shareholder guidance, which may result in increased shareholder litigation," says Jarrod Schlesinger, executive vice president, public company management liability, Chubb Financial Lines.

When assisting clients with their D&O needs, here are three things that matter:

 1) Relationships matter. Building strong relationships with both clients and carrier partners will ensure agents can provide the best coverage possible. Taking advantage of carrier resources, such as environmental, social and governance (ESG) metrics, to assess a client's risk will help you evaluate the likelihood of future claims.

“Working with clients to ensure they are considering these factors and are aware that their ESG approach is a key risk management concern will help clients to continue to get the coverage they require," says Jonathon Palmquist, underwriter, management liability, Beazley.

“ESG issues will continue to grow in importance to boards, investors and the plaintiffs' bar," Schlesinger says. “The focus by the U.S. Securities Exchange Commission on climate change will likely put pressure on companies to demonstrate preparedness and engagement both within their operations and those of their supply chain partners."

“Having durable long-term relationships between carriers and agents goes a long way to ensuring businesses can get the coverage they need," Palmquist says. “Find an experienced underwriting partner that understands the market dynamics, has experienced the ebb and flow of the D&O market over the years and can bring their experience to bear when providing coverage that fits the particular needs of the client."

2) Education matters. Offering face-to-face meetings where possible and renewal strategy meetings prior to renewal, as well as offering risk mitigation options, can help you to get clients the best terms, conditions and pricing. As a carrier that meets directly with clients, “we find it very helpful doing these meetings and making sure clients know we are taking that time for them and ensuring any level of comfort that we can," says Christine Williams, chief executive officer, financial services group, Aon.

Working with insurance partners that provide consistency, stability and experience will help give clients the peace of mind and long-term security they need to meet the current challenges. 

3) Expectations matter. The D&O market is facing considerable challenges, including increasing numbers of SCA filings, ESG issues, “transactional risks related to special purpose acquisition companies (SPACs) and de-SPACs, initial public offerings (IPOs), mergers & acquisition activity, spinoffs, and bankruptcy, all of which were significant 2020 risk areas that are pervading in 2021," Senatore says.  

Agents should “have a conversation with their clients to understand what they're trying to accomplish with their D&O coverage and what is motivating them to buy it," says Rodney Choo, senior vice president of executive lines, Risk Placement Services. “Are they really focused more on individual protection, on protecting the corporate balance sheet or is it a combination of both?"

“Identify the goals of the coverage itself," Choo adds. “And once you've identified those, craft a program that best suits that specific kind of focus."

Olivia Overman is IA content editor.