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D&O insurers quitting market: Gallagher

August 7, 2018

Rising numbers of class actions and increased regulatory scrutiny have “unsettled” directors’ and officers’ (D&O) insurers, Gallagher warns.

The broker’s National Head of Financial and Professional Risks Michael Herron says some insurers are reducing D&O risks, while others are walking away from the market.

“Placements have become much more difficult and much more expensive, with premiums increasing 40-400% even if they already increased substantially in the prior year,” he said.

While D&O policies are designed ostensibly for directors and officers, Gallagher says the add-on company securities cover – or Side C – for shareholder class actions is driving insurer payouts.

Third-party litigation funders have been drawn to the sector, and in some cases multiple actions have been brought by competing law firms and funders.

“As a result, insurers are defending more and more D&O claims and they are alarmed by the financial consequences,” Gallagher says. 

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