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Commercial D&O rates off 3.9% in Q2

Average rates for US commercial directors' and officers' (D&O) insurance across total programmes were down 3.9 percent in the second quarter, according to broker Marsh.

Brenda Shelly, the firm's D&O team leader in its FinPro unit in the US, said the quarter-on-quarter decrease was probably the largest in more than two years, based on total programmes.

Market conditions were more stable based on primary-only layers, however, with average commercial D&O rates flat to just 0.1 percent down in the quarter.

Across the D&O sector as a whole, Shelly said rates remain very competitive, particularly for those accounts with stable to strong risk profiles.

But in commercial D&O, many insureds with challenging risk profiles faced average primary rate increases of 10 percent in the second quarter.

"Many insureds sought to offset rates by accepting higher retentions," Shelly observed.

Meanwhile, competition among excess D&O and side A difference in conditions insurers meant that the overall renewal rate impact across programmes was reduced.

And the market capacity for commercial D&O cover remains "stable and robust", even taking into account the proposed Ace-Chubb deal, she suggested.

The executive observed that the dynamics in private company D&O have caused both primary and total programme rates to hover in the flat to 5 percent up range, as a result of primary rate firming being offset by continued competition for excess layers.

"While the news is improving for rates compared to previous quarters, retention and coverage flexibility can still be challenging.

"In some of the more difficult cases, insureds elected to increase retentions and/or give up entity coverage in exchange for a flat or very low increase renewal," said Shelly.

She highlighted antitrust coverage as particularly challenging to place, with insurers in some cases not renewing, or only renewing with coinsurance or a separate retention.

"Also, we're seeing cyber liability exclusions starting to enter this space as underwriters are continuing to try and minimise emerging exposures," she said.

Meanwhile, for non-profit companies - the third major segment of the US D&O market - rate firming continued to outpace that in the private company sector.

Renewals for non-profit organisations produced averaged increases of up to 7 percent, due to the presence and performance of large healthcare risks, Shelly suggested.

She noted that insurers continued to push retentions for both D&O and employers' practices liability insurance, as well as for antitrust-based claims.

"These factors along with the pending Ace-Chubb combination - both of which are leading writers of primary policies in this segment - are likely to keep non-profit rates elevated for the foreseeable future," the executive predicted.

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