Printer Friendly

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."

[GRAPH OMITTED]
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
COPYRIGHT 2003 A.M. Best Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2003, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Jul 1, 2003
Words:321
Previous Article:Middle market looks for insurance alternatives. (Property/Casualty: Loss/Risk Management Notes).
Next Article:Assessing real risk: realistic risk management requires more than traditional financial reporting and risk measurement techniques....
Topics:


Related Articles
Financial-Services Executives Disagree On Role of Internet.
By The Numbers.
Accounting for Costs.
Taking aim at smaller prey: companies that used products containing asbestos are the newest targets of litigation. (Briefing).
D&O [directors and officers insurance] recovery linked to realistic rate base: Reeling from the effects of corporate scandals, D&O insurers are tying...
Battling rising prices: increases in costs of key components in claims drive price indexes for the property/casualty industry's major business lines.
Corporate trends likely to ignite increasing pressure on D&O market.
The bloom fades: new capacity is putting pressure on the primary U.S. casualty market, and reinsurers are shying away from some lines they think...
Securitization's big bang: leaders of North American life insurers say they are considering securitization as never before.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters