In 2009, the increase in limits dropped to 15 percent of buyers, but rose again in 2010 to close to 25 percent. On the other hand those companies that lowered their limits stood at 5.5 percent in 2009 and 5 percent in 2010.

Marsh notes multiple reasons for the increase in purchasing limits:

• The D&O market remains soft for the eighth quarter. Average primary rates in the third quarter of 2011 decreased 5.5 percent and total program rates have dropped an average in excess of 6 percent.
• Capital for the insurance industry remains abundant and “most management-liability insurers” remain profitable. Class-action trends against corporations have remains “relatively stable,” all of which combines “to create a favorable environment for insureds. Organizations are able to add protection by increasing limits while keeping their overall costs stable.”
• Regulatory scrutiny has increased and a “number of government actions and regulations—including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010—are beginning to affect the D&O market and increase the exposures of directors and officers.”

As far as who is buying the limits, Marsh says large and mid-cap companies are increasing their D&O limits in greater numbers. More than 40 percent of companies with market capitalization of at least $2 billion increased their limits. Only 18 percent of companies with a market cap of $301 million or less did the same.

None of the large-cap companies lowered their limits, says Marsh.

The trend is “likely to persist” as the regulatory environment becomes increasingly active, Marsh says.

Tripp Sheehan, Marsh's U.S. D&O practice leader says he is not surprised by the numbers. He believes public corporations that sought savings during the financial crisis in 2009 and 2010, are now in a position to spend more for D&O coverage in the face of what they see as increased exposure from federal regulation.

He does not believe any one factor is compelling clients to purchase more, but does feel the combination of increased regulation and affordability for the insurance are driving buying decisions.

Over the past five to six years there has been “a steady trickle” of new players in this space, primarily in excess lines, Sheehan notes. The players are a combination of carriers that never wrote this coverage before and European companies that wrote D&O in Europe and are setting up shop in the United States.

“Excess is more competitive,” he says. “That is primarily where the new players participate.”

He doubts that any single event within this sector will turn the market. Instead, he believes the end of the soft market will not come until capacity is driven out or an inadequate amount of reserves begins to erode profits as loss frequency and severity worsens.

For the immediate future, Sheehan believes that the market will continue to be soft, despite the fact that the decline has slowed.

“We'll still see a soft market, especially in excess layers,” says Sheehan.

This story was updated at 3:46 p.m. EDT with comments for Trip Sheehan.