Welcome to Global Insurance Law Connect's first review of  international D&O insurance markets. We decided to write this  report because of the scarcity of information on how D&O cover,  pricing and availability compares across different global markets.  In many countries D&O rates are rising, and in some places those  increases are extreme, but this is not the case everywhere. In a  few markets the green shoots of recovery are showing, as clients  reach the limits of what they are prepared to pay, and prices look  set to finally stabilise.

There are other tumultuous events impacting D&O too. The global shocks of the pandemic  have brought corporate turmoil, fuelling a huge spike in corporate M&A as the weak are bought  by the strong, and the well-positioned take advantage of changing markets to expand into  new regions through acquisitions. This in itself brings great pressure to bear on directors and  officers across the board meanwhile, alongside, many companies are also seeing exposure to  new risks brought about by home-working and other pandemic impacts.

Finally, the increase in cyber attacks is driving growth in litigation by those affected, and  in many cases the litigant will also name directors and officers within any class action, also  increasing the perils for elected company officers. Regulation is a further factor in the mix. Together, this all adds up to an increased need for protection for directors and officers,  in a market which lacks capacity to supply it. The impact has been a notable growth in  self-insuring for this class of cover, alongside the increased use of letters of indemnity for  directors and officers.

In the following pages we have reviewed the global trends highlighted above; while the second  half of our report gives you a snapshot of how D&O coverage shapes up country by country. I would like to thank the talented lawyers of Global Insurance Law Connect who have taken  time to discuss the complexities of their local D&O market, to analyse trends, and have brought  their insight to bear on this report. As always, the specialist expertise of our global group of  insurance lawyers sheds light on a complex and challenging topic.


In the majority of countries worldwide, the use of D&O insurance has  been increasing for over a decade. The historic roots of this expansion  lie in an increasing ability for those with a financial claim against a  company to pursue that claim directly against its directors and officers.  The concept of personal liability was introduced by the US in the  Sarbanes-Oxley Act of 2002, which in itself resulted from the huge Enron  corporate scandal – the world's largest company failure of its time.

In the years since 2002, legislators and regulators in many countries  have followed the lead of the US in increasing the personal liabilities  for company directors and officers. This in itself has brought about  an increase in litigation, including a tendency for class action suits to  be targeted at individuals as well as the company they work(ed) for.

For many years, D&O insurance was seen as a relatively stable class  of cover, and discounting was common. It was popular, and its use  also began to grow in countries where it had previously been unknown.  Sakate Khaitan of Khaitan Legal Associates in India comments that  "Over the last decade, the Indian insurance market has seen liability  products like professional indemnity, D&O, cyber protection, etc.  become more prevalent. ...The market is borrowing from the western  world. As companies are becoming sophisticated, their risk and  mitigation strategies need to catch up."

Pricing trends

Stiff competition saw premia heavily discounted inevitably, some  insurers began to take increasing punishment, as successful (and  sometimes very large) claims were paid out.

Justus Könkkölä of Socrates in Finland reflects that: "Historically,  the liability risks of D&O had been relatively modest, partly due to  cultural reasons and features of the legal structure, such as a lack  of opportunity for class actions. The tendency has moved towards a  higher duty of care and expanding of liability risks for top management.  This is among others because of technical development and cyber  risks as well as the increased amount of financial regulation that the  corporate entities must now follow."

As a result of all this, dark clouds gathered, and from 2018 onward,  stress was obvious in D&O pricing. Wij Advocaten in the Netherlands  reports that: "for many years, the Dutch D&O market was considered a  soft market. This is no longer the case. In mid-2019 the market started  to harden and the pandemic is considered to have been an accelerator  further hardening the market."

Some markets took off first, with Australia witnessing a spectacular  shortage of capacity and price increases to match in 2019 – as did  Spain. However, the misery soon spread, and 2019-2020 became  notorious for the increases in cost for D&O premia around the world. In  Europe, Robert Byrd of Byrd & Associates in Paris relates that "whilst  neighbouring markets such as Italy, Germany and Spain reportedly  saw premia increase as early as 2019, the French market escaped  this increase in premia until the first quarter of 2020.

The smaller markets of Latin America suffered just as badly as the  USA and Europe.

João Marcelo dos Santos of Santos Bevilaqua in Brazil reflects  on the many causes that led to this: "Rising D&O claims in the last  five years link to corruption charges, environmental damages,  administrative liability around securities operations, mergers and  acquisitions impacts on tax, labour and anti-competition faults.  Particularly in the last year, the trend in claims relates to tax, labour  and consumer issues, in addition to financial mismanagement, some  of these questions linked with the pandemic situation and its impacts."

Meanwhile in Asia, markets such as China, which were growing,  have also seen increased securities-related litigation. Buren's Li Jiao  recounts that "As investors' awareness and means of defending their  rights continue to increase, the risk of securities-related litigation  faced by A-share listed companies has skyrocketed in China." In India,  the basis for D&O claims widened exponentially: "The market has seen  an increase in "event-driven litigation". Claims which normally were  related principally to financial reports can now be driven by product  problems, man-made disasters, environmental disasters, corruption,  or cyber-attacks."

Prices rose (anecdotally) between 30% and 100% in different  territories, and the pandemic brought a global hardening of insurance  rates that drove D&O rates up further, along with most other classes  of commercial insurance. The pandemic also put further stress on  the category itself – see the section below for an exploration of this  particular issue.

COVID has been linked to D&O price rises, but, as reported by BLM,  "COVID has been an accelerant but not the main cause for the hardening  market with rising premiums in the D&O space. The real reason for  rising premiums was that there was a gradual appreciation that there  was a greater D&O risk in the realms of corporate mismanagement  and financial misrepresentation together with a widening exposure of  new risks in particular like cyber but also environmental and gender  pay/employment issues."

Special Information Report - GILC D&O - Global Trends, Insurance Capacity And Pricing

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.