By Chris Munro

March 4 - (The Insurer) - While pricing in the public D&O market is stabilising, rates remain inadequate in the face of escalating costs and greater sector uncertainty spurred by an aggressive plaintiffs’ bar, the changing nature of claims and the new U.S. administration.

That was just one of the views shared by a quartet of market specialists during a panel discussion at the PLUS D&O Symposium in New York City on Tuesday morning.

After a period of rampant rate reductions in recent years momentum slowed down in 2024, although public D&O pricing remained competitive owing to a plentiful supply of capacity.

The panel's moderator Jaimie Hunter, a senior broker at Lockton Re, said “there’s definitely a big squeeze on carriers right now obviously with the depressed rates”.

“I’m hearing about increased broker commissions as well, and lower to flat ceding commissions on the reinsurance.

“On top of that, there’s obviously a changing competition landscape. Some people coming in new, some people exiting. Obviously some of the new capacity is adding to what is arguably a saturated market.

“Carriers more than ever have to get the pricing right,” Hunter stated.

“The claims side of the equation keeps changing, and it’s very hard to model that,” said Jeremie Saada, head of U.S. executive risk at Beazley.

“Twenty-five percent of the biggest settlements have settled in the last four years. We’re seeing a lot of uncertainty. It’s a really tough time to be a director and officer for a public company,” the Beazley executive said.

“I don’t feel … good about where we are in the rating environment, and I’d like (the market) to at least take a pause,” Saada added.

Brian Zink, senior vice president and head of Everest Specialty Underwriters and U.S. financial lines, noted how the claims environment in the public D&O space has evolved over time.

In the earlier part of this century when the public D&O market was very hard, the major peril faced by D&O underwriters was securities class actions (SCAs), with derivative lawsuits “a tag along”, said Zink.

Derivative lawsuits were “a small number” of the overall number of claims faced, and were “typically settled within the primary limit”, he explained.

“Today SCAs would probably be in a normal year 60% to 65% of your exposure.

“All the data that we typically talk about is the SCA data. Derivatives are all over the map. Social inflation is driving that one because it’s not a formula like when you have an SCA and a stock drop, and you’re trying to figure out what’s the market cap, what’s the drop, and figure out the loss.

“Derivatives is much more grey, and … that’s not a very good dynamic that we’re working with.”

As Zink explained, those issues are compounded by a challenging reinsurance market for D&O business.

“For carriers, it’s probably harder now to get the reinsurance, and specifically in the public D&O space. The pressure is going to mount. There’s been three years of ceding commissions coming down, and now it’s probably not covering your operating expenses, or are marginally.

“And so I think that’s going to drive some behaviour in the next 12 months,” Zink added.

Ziad Kubursi, head of financial and executive liability at The Hartford, commented that “rates are inadequate”.

However, he said he is optimistic about the market’s prospects.

He noted that SEC chairman Gary Gensler is leaving his position and will be replaced by Paul Atkins, whom Kubursi described as his “polar opposite”.

“We're talking about less regulation, we're talking about being more focused on the core directives of the SEC.

“We're moving away from over-regulating, new regulations and various other things. And so the way I see it is that I think there's going to be less activity on the SEC side.”

Kubursi noted that President Trump will be able to appoint a significant proportion of federal judges during the current administration.

As such, Kubursi suggested those judges will be “less active”.

“They're going to be less punitive towards companies and corporations. I think everything they're trying to do is to really stimulate the economy.”

The Hartford executive said it remains to be seen what ramifications the recently imposed tariffs will have.

“There's a direct correlation to tariffs and inflation. There is a correlation between tariffs and consumer spending. There's a correlation between tariffs and our position in the global market.

“So there's a lot of factors that are going to be impacting what companies in the U.S., publicly traded companies, are going to look like over the next few years.

“It'll be interesting to see what happens in the next couple of years,” he said.