Underwriting Trends in the Private D&O/EPL Marketplace – Stuck In The Middle With You

Stuck in the Middle of the D& Marketplace

Currently not only are we transitioning between a soft and hard market, but we, as brokers, are finding ourselves stuck in the middle between carriers who are trying to fix profitability challenges and clients who are trying to minimize changes in terms and conditions. Private D&O is almost universally seeing premium increases, even more so than public D&O.

Private D&O, which has historically been a profitable class, is seeing poor claim performances due to such claims as Regulatory, Anti-Trust, M&A and business practices. EPL claims such as retaliation, disability, pregnancy discrimination, and LGBT are up even though unemployment rates are going down. The EEOC is focused on enforcement, and increased funding is leading to more litigation brought directly by the EEOC. In the last decade, the EEOC has averaged over 80,000 new cases per year. Private companies with 100 or less employees are by far the most often sued, accounting for over 40% of claims. Soon we can expect to see a rise in claims for homeowners associations and private universities.

To improve results, underwriters are taking actionsnonrenewing policies, decreasing limits, increasing retentions, increasing premiums. Some carriers are also limiting entity coverage (side C) to prevent being pulled into claims that the form never intended to cover. Underwriters are scrutinizing certain industry classes and geographic locations more than others – mostly healthcare and for profit education and insureds located in California, where the probability for an employer of 30 employees or more to have an EPL claim within a 5 year period is 100% – and to a lesser degree, energy (particularly solar and biofuel) and neutraceuticals.

As brokers we can manage clients’ expectations so they won’t experience “sticker shock.” Even though premium is increasing, today’s pricing is less than half it was a decade ago. And there is still underwriting flexibility, but agents must work with their clients to get underwriters a solid submission. Underwriters want to understand what is happening but years of soft market have watered down the quality of submissions. If there is a story to underwrite, they need to hear it, particularly – why claims happened and what companies are doing regarding loss mitigation going forward – and the story behind the financials, what is happening and will the company be able to pay their bills and be around next year. Underwriters are also tracking ownership details, especially in family-owned businesses that can present serious D&O risks when certain family–member shareholders are involved in running the business and others are not. It is impossible to underwrite when you don’t know the nuisances of the relationships. A partnership between the carrier, broker, agent and insured to get appropriate levels of underwriting information is key.

We are here to make it easy for you to sell as much D&O and EPLI as possible, just give us call and we will respond quickly.

Enhanced by Zemanta
Leave Yours +

No Comments

Leave a Reply

You must be logged in to post a comment.