D&O insurers quitting market: Gallagher

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.