An abundance of capacity is the name of the game in the Directors & Officers and Employment Practices Liability insurance marketplaces, said Willis.
Overall, on average, D&O rates are down 5 percent to up 5 percent, while EPL rates are down 3 percent to up 3 percent, according to Willis’ 2015 Marketplace Realities Spring Update.
The broker said “capacity continues to provide opportunities across most market segments and industries” in the D&O market. “Competition presents opportunities to improve terms or move to a preferred carrier.”
Willis warns the market could change dramatically due to some factors related to US stocks. The Federal Reserve will have to raise interest rates “at some point” because without higher rates, “concerns over the Federal Reserve’s ability to address the next crisis suggest that a downturn may have a broader, more severe impact.” Additionally, stock markets are at near highs around the world. Bad news can lead to bigger drops, which leads to more securities lawsuits carrying a higher severity.
But for now the D&O landscape is being painted by capacity and competition.
In EPL, Wage & Hour risk remains a major concern for buyers but markets outside the US have offered a blended W&H/EPL product as well as a stand-alone. This is a good thing since anticipated amendments to the Fair Labor Standards Act in 2015 may increase exposures.
Overall, EPL capacity is more than $800 million and the frequency and severity of claims decreased except in California.
“The decrease in claim frequency and severity has made it difficult for insurers to justify greater increases across their books, and indeed with ample capacity we are seeing small increases in many cases,” Willis said. California is the outlier. Here, some carriers are looking for higher retentions and double-digit rate increases.
See the whole report from Willis, including additional information on these markets as well as others, including Errors & Omissions and Fiduciary: 2015 Marketplace Realities Spring Update
Chad Hemenway is Managing Editor of Advisen News. He has more than 15 years of journalist experience at a variety of online, daily, and weekly publications. He has covered P&C insurance news since 2007, and he has experience writing about all P&C lines as well as regulation and litigation. Chad won a Jesse H. Neal Award for Best Single Article in 2014 for his coverage of the insurance implications of traumatic brain injuries and Best News Coverage in 2013 for coverage of Superstorm Sandy. Contact Chad at 212.897.4824 or [email protected].
