Risk-Adjusted Benchmarking: D&O Rates Rise in Fourth Quarter

Though overall program rate reductions were still achievable until the fourth quarter, by the end of 2012 insurance premiums were generally flat to up slightly.

Whistleblower activity is increasing as the SEC maintains a robust bounty fund for qualifying awards. Clawback claims are also on the rise, and long-delayed rule making under both Dodd-Frank and the JOBS Act remains squarely in focus for insurers and insureds alike.

The market for directors and officers (D&O) liability insurance is in a state of transition at the start of 2013. Though overall program rate reductions were still achievable until the fourth quarter, by the end of 2012 premiums were generally flat to up slightly. Excess insurers are now taking a more disciplined approach to capacity, and insureds should be prepared for continued price firming in 2013.

This Marsh Risk Management Research report introduces the concept of risk-adjusted benchmarking to provide an enhanced view of market rate changes. Compared with our traditional benchmarking approach, which analyzes similar programs, our risk-adjusted methodology enables us to provide a more robust sample set and granular view of market trends — using data from a larger set of Marsh client renewals and normalizing for individual company risk profiles, accounting for differences in retention levels, layer size, and other factors.