A look at D&O, EPLI churn rates

By Rebecca Bole on May 27, 2015

What follows is an excerpt from a presentation by Advisen’s Rebecca Bole, senior vice president of research & editorial, given at the Management Liability Insights Conference in Chicago on May 19.

Executive Risk Network members can download all the slides from the presentation:

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Willis recently said that in the latest renewal period, on average, D&O rates are down 5 percent to up 5 percent while EPL rates are down 3 percent to up 3 percent – so relatively flat, in other words.

Advisen has its own take on the rating environment. The ADVx insurance premium index (below) tracks changes in program premiums paid at renewal by commercial lines insurance buyers.

This line graph shows the ADVx values from 2009 to 2014 for the D&O market (in orange) and EPLI in blue. The green line is the ADVx Composite index, which includes a basket of commercial insurance lines including auto and general liability, A&E, products liability, property, workers compensation and umbrella, among many others.

So, we can see here that premiums have been increasing in the P&C insurance market across the board since the end of 2011. With increases in D&O and EPLI product lines out-kicking the composite index.

The churn rate – that number of buyers switching carrier at renewal – is shown by the blue bars. This rate is down to 6.3 percent and has been hovering around there for a couple of years.

The green line shows the premium charged at renewal with the existing carrier. This line has been tipping upwards in recent years. Meanwhile, the red line–premium charged with a new insurer–is falling slightly more steeply.

The gap in premiums charged at renewal is growing between carriers hungry to poach existing business and those looking to hold on to their portfolio.

How does this look for EPLI? (above) Well, firstly, the churn rate for EPLI is higher, at around 7.3 percent moving carriers at renewal in 2014. This has remained fairly consistent over time.

The gap between new carriers and incumbent carrier renewal rates is not as great as in D&O, however. This may indicate a market consensus that rates need to improve, which outweighs the competitive spirit.

Rebecca Bole is EVP & Editor-in-Chief at Advisen. She has nearly 20 years of experience in the international insurance markets, both as an underwriter and a journalist. Contact Rebecca at [email protected].