Mr. Rice also said the gap between attractive prices being charged by incumbent D&O carriers and higher prices that have been charged by competitors in recent quarters has started to narrow.

He stopped short of linking the two trends together, however, attributing the overall price reversal instead to the simple fact that prices have nowhere else to go.

Aon's D&O Pricing Index, which tracks D&O premiums relative to a base year of 2001, came in at 1.21 for first-quarter 2009, meaning that prices are 21 percent higher than the 2001 base year in nominal terms--not adjusted for inflation.

From the index's highest point, which was in fourth-quarter 2002, through the first quarter of 2009, the index value dropped from 2.63 to 1.21. That means "about 60 percent of the rate has been taken out of the market already," said Mr. Rice. "There's not a lot of rate to give back at this point in time, particularly when you look at the claims out there," he concluded.

Giving a "rough cut" of preliminary data for recent quotations, he said the second-quarter 2009 index will likely settle in at something between down 2 percent to up 1.5 percent compared to second-quarter 2008 when all final premiums are recorded for the quarter ended June 30. "But it's certainly not going to be down like it was in the majority of those [previous] 21 quarters."

As for the gap between incumbents and non-incumbents, Mr. Rice explained that traditionally, competitors trying to wrestle business from existing incumbent D&O carriers have charged lower prices to entice buyers. "That's natural because...those that are competing for the business that don't have it would have to give something in order to get the business," he said, noting the giveback was typically a better price.

The situation is now reversed because carriers that have dominated the D&O market--AIG, XL, Hartford--"have fallen on some tougher economic times," prompting non-incumbents markets to try to sell their better financial security rather than better pricing.

"So non-incumbents are quoting higher premiums than incumbents on the same layers of insurance. That never used to be the case," Mr. Rice said, putting the price spread between the two groups at roughly 300 basis points (3 percent).

He said the spread is narrowing now because both sides are moving toward the middle--not just because incumbents are moving up on pricing or because competitors are moving down.

"But those incumbent markets--the ones that have had the tougher times--are doing a pretty good job of keeping the pricing down to flat for the clients," he said. The non-incumbents, he said, "are looking at claims histories and saying if we're going to play on this we need to get higher rates."

Mr. Rice said widely reported price distinctions between financial institutions and other D&O buyers have continued in the second quarter. During the quarter, he said the maximum hike Aon saw for a financial institution's D&O program was 79.6 percent, while the maximum decrease for a non-FI program was 56 percent.

Looking into the future, Mr. Rice said he does not foresee non-financial institution D&O buyers facing the kinds of significant price jumps that financial institution buyers started to see late last year mainly because the number of securities lawsuits (the principal drivers of D&O claims) has not increased dramatically for non-financial companies.

The Aon Quarterly D&O Pricing Index is compiled from proprietary policy data for over 5,000 D&O programs for publicly traded companies--predominately U.S. insureds. The index, officially published six-to-eight weeks after the close of each quarter, represents the weighted average cost of $1 million of D&O insurance.