Insurance agents are probably aware that the D&O market, particularly the public company D&O market, is softer, but the underlying claims activity did not improve in 2006. An excellent summary of the current state of public company D&O claim activities can be found at SEC Actions (see here). Key points:
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The number of securities class actions filed last year declined
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The cost of settlements increased
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Outside directors contributed personally to the settlements in a number of cases
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Derivative actions are increasing
Also noted is the amount of the increasing average settlement: in 2006 the average settlement in a securities class action was $45 million (excluding the five cases in excess of $1 billion).
The most disturbing trend may be the number of directors who had to contribute to settlements out of their personal funds. This exposure applies to all types of D&O, including private company D&O and non-profit D&O as well as public company D&O. While increasing the D&O limits may help here, that is not the only solution. Better corporate governance, compliance programs and more active involvement by the directors also helps.
eSpecialty Insurance is your specialty insurance expert. We have developed a streamlined marketplace to provide multiple proposals from a range of competitive insurers, along with expertise to help you evaluate your exposures and choose the best combination of comprehensive coverage and price. We look forward to working with you.
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