For several years, the D&O market has been challenged by legal woes, greater competition amongst insurers, and increased claims. The marketplace today is a much different environment than before and is presenting new challenges to insurers, brokers and insured who must stay abreast of emerging risks. In a recent report from Allianz Global Corporate & Specialty (AGCS), the company notes experiencing a double-digit rise in D&O claims in the past five years. Beyond the number of claims trending upwards, their severity also is rising significantly in markets around the world, with some sources recording loss ratios above 100% in the U.K., U.S., and Germany since 2017. Among the many drivers pushing D&O claims forward, AGCS points to five major trends that will impact D&O insurance in the coming months, which can be viewed in the above slideshow. Although these challenges have existed for years, the business has only recently shown signs of entering a hard market, says AGCS. "Despite rising claim frequency and severity, the industry has labored under a persistent and deepening soft market for well over a decade before seeing some recent hardening," says the "Directors and Officers Insurance Insights 2020" report. "Market reports estimate that the D&O insurance industry has underreserved for losses by somewhere between $3 billion to $5 billion in recent years — a significant portion of premiums earned even as loss ratios are among the highest since the financial crisis." |

D&O risk mitigation

AGCS suggests a few ways brokers can help corporations reduce their D&O exposure, including: |

• Taking more entity risk on the company balance sheet via higher Side-C and Side-B retentions;
• Reduce Side-C limit and purchase more Side-A cover for individual officers;
• If applicable, incorporate international insurance solution limits; and
• Consider alternative risk solutions.

Related: |

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• Securities fraud claims driving up D&O insurance costs