Also noted in the report is the fact that third-quarter 2008 is the 20th consecutive quarter for which D&O pricing fell year over year. In other words, when each quarter's price level index is compared to the same quarter a year earlier, the pricing index for the more recent quarter is lower.

The year-over-year decline for third-quarter 2008 was 5 percent, Aon reported.

As noted in prior reports, the overall nominal pricing index of 1.13 reflects continued price declines for D&O insurance buyers outside the financial institutions sector (non-FI risks). But the index shows there were price hikes for financial institutions (FI risks), which started in late 2007.

As noted in prior reports, the overall nominal pricing index of 1.13 reflects continued price declines for D&O insurance buyers outside the financial institutions sector (non-FI risks) across all industries as a whole. But the index shows there were price hikes for financial institutions (FI risks), which started in late 2007.

Without adjusting for inflation, the separate indices were 1.02 for non-FI risks and 1.58 for FI risks. This means that non-FI prices were only 2 percent higher than 2001--without an inflation adjustment, which would indicate a double-digit decline in real terms. FI prices were 58 percent higher than 2001 without an inflation adjustment.

Aon said it expects D&O pricing to start moving up for everyone next year.

"Historically, D&O pricing moves in the opposite direction of the equity markets," the report said. "The predominantly negative volatility of the markets over the past year in general, and the past three months in particular, would indicate that D&O pricing and coverage characteristics are going to change."

"As stock prices fall, shareholders become increasingly disgruntled and eventually look for someone, or something, to blame," the report said.

Noting that there is typically a lag between the drop in stock prices and the rise in D&O pricing, Aon forecasts a shorter lag this time around than history would suggest "given the abruptness with which the [stock] markets have fallen."

The report includes, for the first time, a chart comparing D&O pricing, claims frequency and stock market indices to provide a historical perspective.

The Aon Quarterly D&O Pricing Index is compiled using the proprietary policy data of Aon's Financial Service Group.

According to a report footnote, the D&O Pricing Index is currently comprised of policy information on over 5,000 D&O programs for publicly traded companies--predominately U.S. insureds--between Jan. 1, 2001 and Sept. 30, 2008. The Index represents the weighted average cost of $1 million of D&O insurance.

According to the report, this average "rate per million" of limit includes full D&O placements and Side-A (non-indemnifiable loss) placements. Programs with blended coverage (such as a shared limit for D&O and fiduciary liability combined) are excluded from the Index.