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D&O market continues to firm

Average rates for US and international directors' and officers' (D&O) business increased for the third year in a row in 2013, according to an annual survey conducted by a subsidiary of London-listed broker Jardine Lloyd Thompson (JLT).

The survey found that 82 percent of respondents reported moderate increases in premium of under 10 percent, with 12 percent saying they experienced an increase of more than 20 percent.

The survey participants were 171 D&O insurance buyers from a range of locations and sectors, including manufacturing, financial services and retail.

In 2013, 55 percent of private and non-profit buyers saw an increase in their primary D&O cover, compared to 41 percent in 2012.

Forty four percent of public company buyers also reported an increase, compared to 29 percent the previous year.

The excess market also saw an increase in premium, with nine out of 10 companies reporting that they purchased excess coverage through at least one insurer other than their primary insurer.

However, strong competition prevented premium within the excess market from increasing significantly.

Thirty six percent of respondents noted increases in premium in their excess layer, but the majority of these increases were modest, with 85 percent reporting a rise of less than 10 percent.

"Despite competition excess pricing was impacted but only minimally, with 56 percent reporting an increase of less than 5 percent," commented Paul Scope, chairman and CEO of JLT Park.

"Breadth of coverage, already the number one consideration on the primary side, has now become the most important attribute sought in excess coverage," he added.

Financial strength rating and competitive pricing were also considered important when looking at both excess and primary insurers.

Despite the increase in premiums, retentions remained stable in 2013.

Eighty nine percent of respondents reported no change at all, with only 9 percent reporting an increase and 2 percent noting a decrease.

JLT said it thought this was because the majority of respondents were large organisations, which tend to be less impacted in terms of rates than smaller firms.

Firms with total assets greater than $10bn reported average limits of $185.8mn.

Although the majority of respondents maintained their limit when they renewed, almost 20 percent of those surveyed increased their liability limit despite rising prices.

Scope added that concerns over regulatory claims had continued to increase and had overtaken both direct shareholder and derivative shareholder suits as the top D&O liability concern.

Overall, the survey found that buyer interest in the amount and scope of coverage remained high compared to previous years.

In 2013, JLT acquired the insurance and reinsurance operations of broker Towers Watson, the original producer of the annual report, after which its Bermudian arm JLT Park took over the survey.

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