U.S. publicly-traded clients paid 4.9 percent more on average for their primary directors and officers liability (D&O) coverage in the second quarter, according to global broker Marsh.

However, Marsh said, when normalizing for individual insurance program structure and risk profile differences, average primary D&O premiums actually declined 0.97 percent in the quarter.

Brenda Shelly, D&O Product Leader for Marsh, said that underwriters remain concerned about merger objection claims, corporate regulatory investigations, and compliance and enforcement activity. “However, clients are still able to obtain favorable terms, conditions, and pricing, especially on excess program layers,” she said.

In its latest Marsh Risk Management Research Briefing Ris, “Adjusted Benchmarking: D&O Rates Fall in Second Quarter,” Marsh compares traditionally benchmarked insurance price changes to benchmarked prices that have been risk-adjusted. In the second quarter, average risk-adjusted primary and total program D&O rates fell in nearly all market cap segments.

Marsh said its risk-adjusted benchmarking provides a new view of market trends — using data from a larger set of Marsh client renewals and normalizing rates for changes in exposures, including those related to market capitalization, stock performance, valuations, balance sheets and accounting for differences in program structure such as retentions and limits. Traditional benchmarking considers only the change in price paid for insurance comparing only clients with the same program structure with no changes to limits and retentions.

“With Marsh’s risk-adjusted benchmarking methodology, our clients now have an additional perspective into market rate changes in order to make more informed decisions about how to structure their insurance programs,” said Shelly. “By normalizing D&O premiums for changes in program structure and risk profile, our clients are able to determine how current market pricing is pacing with their exposures and risk management strategies.”

Source: Marsh