Sign In  |  Register  |  About Los Altos  |  Contact Us

Los Altos, CA
September 01, 2020 1:26pm
7-Day Forecast | Traffic
  • Search Hotels in Los Altos

  • ROOMS:

Best’s Market Segment Report: AM Best Assigns Negative Outlook to U.S. Directors and Officers Insurance Segment; Notes Abundant Capacity, Decline in Demand

AM Best has assigned a negative outlook to the U.S. directors and officers (D&O) market segment, citing growing competition as a key factor that has led to more capacity and lower pricing.

In addition to rising legal expenses and growing exposures from new technologies, regulatory pressures around environmental, social and governance costs are also fueling headwinds for the D&O market.

“The current pricing environment may prove unsustainable based on developing losses and how those losses affect company underwriting results prospectively,” said Elizabeth Blamble, senior financial analyst, AM Best.

Premium in the D&O segment is down almost 20% from its peak of $14.9 billion in 2021, according to a separate Best’s Market Segment Report on the segment, titled, “US D&O: Return to Normalcy in Results, Demand, and Pricing.” Decline in demand for transactional coverage, IPOs, and pricing are also driving premium down. AM Best estimates that premium for full-year 2023 will reach $12 billion. The direct loss ratio through third-quarter 2023 was 51.5 and is on track to be the lowest in nine years, according to the report.

“If results continue to be favorable and prior accident year reserve development does not begin to trend adversely, additional capacity may flow into the D&O market,” said David Blades, associate director, AM Best.

U.S. corporate directors and officers have faced numerous challenges in the past several years, including inflation and interest rate risk, equity market volatility and adverse legal trends related to social inflation and litigation funding. The rising cost of litigation related to these risks has made managing loss frequency and severity trends difficult for D&O insurers.

The report also notes that additional capital has entered the D&O market from new carriers as well as existing carriers seeking to expand their writings. The plummeting number of initial public offerings meant that the demand for coverage has dropped. Concurrently, companies entering the market that are unencumbered by legacy claims continue to grow market share, which has resulted in highly competitive conditions with supply outpacing demand.

“Given the impact of economic inflation, social inflation, and litigation funding, D&O insurers’ prior accident year reserve development could become adverse,” said Christopher Graham, senior industry analyst. “So far this year, a few prominent public companies have noted in their fourth-quarter earnings calls that they have experienced adverse development on certain casualty lines of business.”

To access the full copy of this report, please visit

To view a complete list of Best’s Market Segment Outlooks, please visit

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Copyright © 2010-2020 & California Media Partners, LLC. All rights reserved.