Directors and officers (D&O) liability insurers are expected to remain willing to walk away from business or reduce capacity, if they are not getting the pricing they need, according to the report, The US Financial and Professional Lines Market in 2019: Our Top 10 List.
Produced by Guy Carpenter’s affiliate, Marsh, the report states that insurers will likely be less inclined to negotiate policy wording requests and enhancements. Overall, capacity remains abundant but available only at the “right price.”
In addition, in a gradually firming D&O market, insurers will likely take more aggressive coverage positions and more strictly enforce certain policy provisions. While insurers have often granted clients somewhat liberal policy interpretations and paid claims in the past, they may take a more conservative view and deny substantially similar claims going forward.
Insurers will be more likely to take a harder stance on late notice issues, incurring defense costs without prior consent, and interrelatedness issues, to name a few. The report indicates expectation of more claim denials for noncompliance with technical policy provisions and more deductions of defense costs for noncompliance with litigation guidelines. The anticipated shift in insurer claims behavior highlights the importance of understanding the claims reputation of each insurer on the program, each insurer’s ability to shape the tenure of coverage discussions in connection with a claim, and the value that long-term insurer partnerships can play.
The report also states the extraterritorial reach of the European Union General Data Protection Regulation has expanded data security and compliance responsibilities for companies and their directors and officers, who can be held personally liable.
Finally, the rise in protectionist trade policies and sanctions (such as the re-imposed sanctions against Iran and the United Kingdom’s expected March 2019 withdrawal from the European Union) have made operating outside the U.S. more complex. Organizations and their directors and officers must tread carefully even when navigating jurisdictions in which they are familiar.