Report highlights key trends shaping New Zealand D&O liability insurance market

Report highlights key trends shaping New Zealand D&O liability insurance market | Insurance Business New Zealand

Professionals Risks

Report highlights key trends shaping New Zealand D&O liability insurance market

Market forecast also unveiled

Professionals Risks

By
Roxanne Libatique

Marsh has released a new update on the New Zealand directors and officers (D&O) liability insurance market, providing insight into current premium trends, underwriting practices, and emerging challenges in the sector.

D&O insurance remains a critical protection for business leaders facing personal liability in connection with their corporate roles.

D&O liability insurance trends

In 2023, New Zealand’s D&O insurance market saw strong competition among insurers, resulting in reductions in premiums and increased willingness to take on risks. This competitive environment benefited many insureds, particularly larger companies, who saw premium decreases of 5% to 15% across their insurance programmes.

The highest levels of competition occurred in the upper layers of insurance placements, where some premiums dropped by up to 25%. Primary insurance layers typically saw smaller reductions, ranging from flat rates to decreases of around 10%.

Small and mid-sized companies, whose D&O policies are often bundled with other liability covers, saw premium movements that were generally flat or increased slightly, with rate changes between 0% and 10%. These rate adjustments varied depending on factors such as claims history and changes in the business’s risk profile.

Marsh noted that while the current market remains favourable for many businesses, companies should stay cautious of evolving risks. External pressures, including economic uncertainty and rising interest rates, continue to affect the outlook for the broader D&O insurance market.

D&O liability insurance underwriting and key risk areas

Underwriting trends throughout 2023 centred on financial resilience, particularly with the challenges posed by higher interest rates and disruptions in global supply chains.

Insurers scrutinised the financial stability of companies to gauge potential risks tied to insolvency or liquidation.

Environmental, social, and governance (ESG) considerations also featured prominently in underwriting decisions, with insurers increasingly requiring companies to outline their strategies for managing climate-related risks.

Global developments and local impact

Gallagher’s recent report on the state of the D&O market highlighted similar themes but with a broader, global outlook.

In the US, more than 30 new insurers have entered the public company D&O market, increasing competition and driving down premiums, especially as IPO activity has slowed. At the same time, regulatory oversight in the US is intensifying, with new rules requiring public companies to disclose major cybersecurity incidents and climate-related risks.

These global shifts are likely to influence the New Zealand market as well, as companies here face similar pressures around governance, risk management, and regulatory compliance. Insurers are already developing new products aimed at covering corporate investigations, which could become more relevant in the face of increasing regulatory actions.

D&O liability insurance market forecast

Going forward, Marsh predicts continued strong competition among insurers, particularly for renewing policies with established clients. For more complex or new risks, the competition has been less pronounced.

Companies that experienced premium reductions in 2023 may continue to benefit from competitive market conditions, potentially seeing improved policy terms and increased coverage limits.

However, the long-term direction of the market remains unclear, with class action lawsuits being a major concern for publicly listed companies in New Zealand. Litigation funding is a growing factor in this space, with both insureds and insurers paying close attention to the results of the New Zealand Law Commission’s review of class actions and litigation funding.

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