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Tillinghast: D&O rates rose 29%. (Property/Casualty: Loss/Risk Management Notes).

Directors and officers insurance premium rates jumped 29% in 2002, the largest increase the market has seen in almost 20 years, according to a survey by Tillinghast-Towers Perrin.

In a sign of the continuing hardening of the market, the industrywide capacity for D&O coverage dropped for the second year in a row to $1.50 billion, the lowest level since 1998 and down from a high of $1.58 billion in 2000.

"Many D&O insurers were increasingly selective as to which risks qualified for their full limits capacity in 2002. This meant that buyers of D&O insurance often found it necessary to purchase smaller layers of insurance from more carriers or employ quota share arrangements to obtain the limits they sought," Tillinghast said in its study.

Terms and conditions also tightened. The average entity/corporate reimbursement flat deductible rose 19% in 2002 to $497,000, up from $418,000 in 2001 and up substantially from $380,000, reported in Tillinghast's 2000 survey.

"This hardening follows five years of annual premium decreases in the second half of the 1990s," Tillinghast said. "Coupled with the recent alarming rise in the costs of D&O lawsuits (particularly securities litigation) this has meant that many insurers experienced adverse loss ratios and saw profits turn to losses on this line of business."

Full Limits D&O Capacity for U.S. For-Profit Companies

The total amount of coverage offered by insurers in the D&O market in
2002 retreated to its 1998 level, down from the all-time high reported
in the 2000 survey.

1984 373
1985 256
1986 412
1987 554
1988 579
1989 605
1990 638
1991 703
1992 726
1993 776
1994 835
1995 895
1996 1,155
1997 1,350
1998 1,500
1999 1,550
2000 1,575
2001 1,550
2002 1,500

Source: Tillinghast-Towers Perrin 2002 Directors and Officers Survey

Note: Table made from bar graph
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Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Jul 1, 2003
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