XL Group says pressure to improve results will lead to rate increases of up to 5 percent overall on private company D&O/EPLI policies this year, even as carriers compete for good business.
“I would expect to see small increases overall, in conjunction with a move toward higher retentions for EPLI accounts,” after the soft market conditions of 2007 to 2013, said Paul Rowe, senior vice president and head of XL’s Private Commercial group. The business saw a small increase in 2014.
The global insurer and reinsurer told Advisen that demand among private companies for management liablility products has increased slightly, with small to mid-sized businesses still only buying employment practices liability insurance. A smaller percentage of mostly larger private companies also purchased directors and officers coverage, as well as fiduciary and crime, Rowe said.
The size of any rate increases this year will vary depending on client account and geography.
“Competition is very stiff for clean accounts,” Rowe said, so an existing customer may be able to demand decreases. “On the other hand, I expect that rate will increase for accounts in tougher states,” such as California, New York, New Jersey, Florida and others, especially for EPLI.
XL sees flat rates for Side-A, or coverage for individual directors and officers, and increases of up to 5 percent on excess D&O.
Travelers has experienced growing demand for Side A DIC, or difference in conditions coverage, which ensures overage of personal assets when a loss is not paid by other insurance or indemnified by the corporation.
“Increased demand appears well founded,” given two recent non-indemnifiable settlements in excess of $100 million, said John T. Trefry, D&O product manager at the US casualty insurer.
Trefry also said capacity had grown in the D&O market, with increased competition from established carriers and newer entrants.
“It is even more important now to practice disciplined underwriting and responsible growth,” he said.
ACE Group said it has seen significantly increased demand for private-company D&O, driven by mounting enforcement of the False Claims Act. The Dept. of Justice recovered $5.7 billion last year under the law prohibiting fraud against the government, up from $3.2 billion in 2013, he noted.
“The primary driver of demand is litigation,” said Keith Lavigne, executive vice president in the property and casualty insurer’s USA Professional Risk segment. Entity coverage was excluded in private-company D&O until complaints began to be drafted against entities as well as individuals, he added.
A sticking point this year is Wage and Hour coverage, especially in a state like California, where payroll claims have surged.
XL offers a stand-alone policy for large US businesses through its Bermuda operation. Wage and Hour defense coverage, subject to a sub-limit, is available as part of EPLI for private companies, but not for all segments—and not in California.
“Many carriers are pulling back on the W&H offering, which is why many brokers are asking if we will provide it,” Rowe said.
The insurer has also seen more requests by brokers for removal of consent to settlement or “hammer” clauses in private company D&O/EPLI policies, as well as endorsements for losses that result from violations by the insured of the Affordable Care Act and lower limits for losses resulting from violations of the Health Insurance Portability and Accountability Act.
