Current Market Q4 2022

After several years of elevated pricing, the D&O marketplace continues to stabilize and Q4 2022 finished with overall declining rates. More importantly, this trend appears to be continuing into Q1 2023 signaling an official end to the 2020-2021 hard market. According to an AON Quarterly D&O Pricing Index report, "The average price per million of limits, decreased 17.8 Percent in the fourth quarter of 2022. The following are key results and highlights:

•  The average premium per million decreased 15.3 percent compared to the prior-year quarter.
•  Premium per million for clients renewing in both Q4 2022 and Q4 2021 decreased 17.6 percent.
•  65 percent of primary policyholders renewed with the same limit and deductible had a premium decrease, with only 9 percent having a premium increase.
•  Overall premium change for primary policies renewing with same limit and deductible was down 5.1 percent.
•  Over 96 percent of primary policyholders renewed with the same limits.
•  Over 82 percent of primary policyholders renewed with the same deductible.
•  Over 80 percent of primary policyholders renewed with the same limit and deductible.
•  97 percent of primary policyholders renewed with the same carrier.
•  Average Change for Primary Policies with Same Limit and Same Deductible decreased 5.1 Percent.

America isn't alone in this trend. D&O pricing in the UK, Australia and other major economies are trending down as well.

These decreases are primarily due to a considerable number of new markets, including more carriers offering primary placements, heightened competition for excess and Side-A coverages, and improved insurance company loss ratios.

We expect D&O insurance market conditions to continue to moderate and increases in retention levels to ease, except for Initial Public Offerings (IPOs) (including Special Purpose Acquisition Company (SPAC) IPOs), although such retentions should be less than in 2023. Unknown outcomes from any future pandemic, effects of an escalation of the Ukraine/Russia conflict, global inflation, tightening US monetary policy, claims and defense cost escalation could all significantly impact the current D&O insurance market trajectory. Certain industries such as healthcare, crypto currency, biotechnology, life-sciences, technology, cannabis, and those with recent significant D&O claims activity will continue to face challenges in obtaining favorable renewals or initial placements. D&O insurers continue to closely monitor systemic risk from global baking insolvencies in the wake of the recent Silicon Valley Bank and Signature bank failures.