I released our Private Company Management Liability Report in August; this is a very interesting product that allows insureds to combine multiple coverages into a single purchase. We see this as advantageous to carriers, brokers, and their insureds.
Interestingly, we are seeing many additional coverages and carriers in this product line. Carriers are seeking a more cost-effective way to get the numerous newer coverages created over the past decade into the portfolios of their customers. Insureds agree with this approach, favoring it over the aggravation of renewing multiple policies. Brokers like it, too, for the same reason (and perhaps also because it makes it a bit easier to defend their client relationship from getting threatened 1 policy at a time).
Here are a few snips from our Report:
- Carriers are hanging additional coverages on the basic Management Liability insurance (MLI) forms, so we have added several new coverage lines to our tables. In particular, Cyber Risk and Privacy coverages are beginning to become available on MLI policies, as have Errors and Omissions, Media Liability, and Crisis Response protections. There are important management liability risks that would be a good fit in these policies, including Media liability, privacy violations and Intellectual Property liability. Carriers are making inroads into including Privacy coverages in these policies, but we don’t hold much hope for meaningful IP coverages.
- We have selected twenty carriers for this year’s Survey, up from sixteen in 2009. Newly added carriers include Allied World, Fireman’s Fund, Hiscox, RSUI, and U.S. Liability. C.V. Starr has dropped out of the Survey this year, but expects to be back with a reinvigorated product.
- 2010 is proving to be another year of deferred rate increases, as carriers are willing to sharpen the pencil to acquire or retain insureds. Adding to this problem for carriers is that insureds are reducing coverage in order to save premium, sometimes dropping coverages not seen as vital, reducing limits, and increasing retentions. From the carrier’s perspective, this results in less exposure, but also less premium collected.
- Finally, carriers seem to have discovered the specialty insurance segment as a good opportunity for growth (we agree). MLI is a key product in this area, and so it is attracting a steady flow of new capacity.
- A combination of increased combined ratios, lowered returns (or losses) on insurance company investments, and potential deterioration in D&O and EPL loss experience attributable to a severe recession will eventually point toward higher rates. Carriers need to charge adequate rates, and insureds can’t keep reducing coverage forever.
Next issue: D&O Side A Liability (October 2010)