Brokerage AHT Insurance said in its 2015 State of the D&O Market report that smaller companies continue to become bigger targets for lawsuits and that biotechnology and healthcare drew the most securities litigation claims last year.
The two industries, taken together, accounted for 27 percent of claims, followed by services at 19 percent and technology at 16 percent. Technology previously led the list, from 1996 to 2013.
Energy claims, meanwhile, jumped to 7 percent of the total, from a historical average of 2.7 percent, reflecting turbulence in the oil and gas industry, AHT said.
“The likelihood of being sued has remained relatively consistent at 3.6 percent, giving a public company a 1 in 28 chance at seeing a claim,” the report said, “unless you are an S&P 500 company, which only had a 1 in 45 chance of being sued, thus continuing the trend we saw starting last year of smaller companies becoming larger targets.”
AHT also said it conducted a survey of 75 underwriters from 30 carriers on the D&O marketplace.
When asked what type of claim kept them up at night, underwriters put securities litigation first, followed by bankruptcy, regulatory and M&A. Eighty-five percent placed biotech/drugs among their top industries to avoid, and 35 percent chose financials and medical devices each, the three biggest groups. Sixty-five percent said they favored consumer products/retail, 60 percent energy/utilities and 58 percent business services, also the biggest picks in this category.
AHT added that while 74 percent of underwriters surveyed did not expect any new policy coverages this year, 95 percent said primary rates would remain flat to up 10 percent. Almost 100 percent said rates for excess layers would be flat or down as much as 10 percent, a reflection of capacity in the marketplace and the declining severity of securities claims in the wake of the financial crisis.
