What follows is an excerpt from a presentation by Advisen’s Cate Chapman, editor, given at the Management Liability Insights Conference in New York on September 17.
Download all the slides from the presentation:
D&O remains by far and away the biggest product line for executive risk in the US. Almost $9.2 billion in premiums were written last year for limits placed of $2.7 trillion.
That’s growth of 13 percent in both premiums and limits placed from the end of the financial crisis through last year.
And more than 5 percent annual growth from 2012 to 2014. So while D&O is a relatively mature market, there is still steady growth.
EPLI is growing faster, at 26 percent in this decade for both premiums and limits placed. The segment of executive risk insurance is a $2 billion market.
Advisen’s ADVx index tracks changes in premiums paid at renewal by insurance buyers in commercial lines.
This line graph shows the ADVx values from 2009 to July of this year, with the D&O market in orange and EPLI in blue.
The green line is the ADVx Composite index, which includes a basket of commercial lines—auto and general liability, A&E, property, workers comp and umbrella, among others.
Premiums have been increasing in the P&C insurance market across the board since the end of 2011. But increases in D&O and EPLI are well above the composite.
Types of cases in D&O are overwhelmingly securities class actions, or fraud cases, which here include capital regulatory actions—those brought by the SEC and other agencies against organizations raising capital through issuance of securities.
New York is clearly off the charts when it comes to securities class actions, a fact reflecting its status as home to many financial services companies—the targets of cap reg actions coming out of the financial crisis.
The converse is true of merger objection suits and shareholder derivative actions, probably aimed mostly at states like Delaware, where many more corporations from all industries are domiciled.
Taking a look at what’s driving EPLI, clearly both nationally and in New York, it’s Wage & Hour.
When it comes to frequency of claims, W&H has been dominating EPLI for some time, compared with, for example, discrimination and harassment, the next biggest categories of claims.