Driven by a lack of overall profitability and increased securities class action (SCA) lawsuit filings, the directors & officers segment hardened between 2018 and 2021. However, thanks to increased capacity and a reduced number of class-action filings, profitability returned in 2022 and has been driving the soft-market through 2023 and into 2024. 

“A competitive market has provided some signs of stability," says Thor Beveridge, head of executive liability, The Hartford. Additionally, the “lack of activity in the capital markets, including the number of initial public offerings (IPOs), has limited the opportunities for new business within the public D&O space." 

For independent agents and their clients, “ample capacity in public D&O has led to a soft market where rates are increasingly competitive and some carriers are offering broader coverage," says Paul Manguson, public D&O product manager, Travelers. “During the hard market, the focus was generally not on broadening policy terms and conditions, it was on managing through the market dislocation by finding sufficient capacity to meet the client's program placement needs." 

However, the soft market D&O train may be showing signs that it is losing steam. 

“We are seeing some limits on expanding capacity ... but broader coverage options are being entertained, including entity investigation coverage and sublimits for books and records, cooperation costs and reputation costs," Beveridge says. “We are also seeing some markets deploying more capacity per deal to offset some of the rate erosion but not to the extent we saw before the hard market and in line with expectations." 

Further, volatility in the number of SCA lawsuits filed is impacting companies, particularly within the technology and biotech sectors. “When the stock market was doing well there were very few SCA filings because the plaintiff's bar didn't have damages to hang their hat on to bring a suit," says Rozina Karimali, underwriter and regional manager, U.S. executive risk, Beazley. “But currently, even though the stock market is still doing very well, some companies are starting to see a lot more volatility on an individual basis in certain industries—that's led to an increase in SCA filings." 

In 2023, “the number of federal SCAs filed rose abruptly and the cohort of filings that account for a material portion of public D&O insurers' loss costs reached levels similar to the heightened frequency of filings experienced from 2017-2019," Manguson says. “There's been a fair amount of volatility in the number of industry filings in the past handful of years, which makes it difficult to predict the rate of future filings." 

In addition, the number of SCA filings so far in 2024 is up compared to the same period last year. “Carriers are starting to see that the risk of claims didn't go away," Karimali says. 

Nevertheless, “public D&O remains a buyer's market, but it appears that many carriers are hitting their floor in terms of pricing for primary and excess business," says Manny Cho, executive vice president, executive lines, Risk Placement Services (RPS). “Many carriers are evaluating their rate positions on their portfolio to determine their profitability line, and I think we are getting close to the point where they will be willing to walk away if the rates drop much lower." 

Also, “on higher excess positions, we are seeing carriers hold the line to what they feel are their minimum premiums and minimum rate for the attachment point, and they are willing to walk away if they are unable to secure it," Cho says. 

For agents and their clients, it is notable that “insurers are starting to approach underwriting with a more cautious lens again, particularly around emerging risks, such as cybersecurity threats, artificial intelligence (AI) and the regulatory landscape," Karimali says. 

“For example, we are seeing the Federal Trade Commission (FTC) become a lot more confident in its regulation of companies," she adds. “Underwriters and insurers are starting to account for those emerging risks that create a lot of uncertainty." 

Olivia Overman is IA content editor.