Transcript
In the New Zealand directors and officers liability insurance market, competition among insurers remained high throughout 2023, leading, generally, to premium reductions and a broader risk appetite from insurers.
Premium reductions
For large D&O placements of publicly listed companies and large corporates, modest D&O premium rate reductions were typically attainable for the programme as a whole, ranging from 5% to 15% over the past year.
We saw the strongest competition among insurers on the higher excess layers of a placement programme, with the top layers experiencing decreases of up to 25%. Primary layer premium rates typically saw flat to 10% declines.
Premium rates
Small to mid-sized businesses, whose D&O policies are often combined with other liability placements, generally saw rate increases ranging from flat to 10% in 2023 (excluding any rate corrections).
While the current market conditions are favourable, it is important for insureds to maintain a precautionary longer-term outlook due to an evolving risk landscape and challenging macro environment that’s impacting on the majority of insureds.
Market outlook
Further bifurcation in the market is likely as D&O insurers heavily compete for certain business, with incumbent markets typically defending positions strongly. For new or hard-to-place business, insurer competition remains generally static.
Insureds that benefited from rate reductions in 2023 and maintained their existing D&O program structure may benefit from insurer competition through such measures as limits and coverage expansion.
The duration of these favourable market conditions remains uncertain.
Emerging risks
For listed NZX companies and dual listed ASX/NZX companies, class actions and the role of litigation funders remain of particular concern for both insureds and insurers. NZX-listed companies closely monitor developments following the findings of the New Zealand Law Commission Review into Class Actions and Litigation Funding.
Coverage and Underwriting Trends
Throughout 2023, D&O insurers typically focused on insureds' balance sheet resilience, considering the impact of a tight interest rate environment and supply chain disruption. Underwriters scrutinised risks from insolvencies or liquidations, as well as those related to climate change and environmental, social, and governance (ESG) factors, where insurers typically required insureds to demonstrate a clear strategy.
Looking Ahead
Businesses and the insurance market will continue to face challenges and opportunities posed by cyber risks, geopolitical volatility, and technological advancements. Strong insurer competition is expected to persist in the D&O market, leading to premium stability, barring unforeseen changes in conditions. So far this year we have seen generally modest reductions in premium rates and favourable renewal terms.
Download report
For more D&O market insights and other insurance classes, please download our full report.
