D&O Insurance Update for Businesses Directors and officers liability insurance (or D&O insurance) provides important protection for board members and directors and the organizations they serve.Rates and capacity have improved, but risks remain high.Now is the time to make sure you’re covered.

How Does D&O Insurance Work? According to IRMI, D&O liability insurance provides liability protection for directors and officers.You can think of it as a “management errors and omissions liability insurance” policy.If the directors or officers make managerial decisions that lead to financial loss, a D&O policy can provide coverage for resulting claims.

Directors may be held personally liable for their decisions.D&O insurance can provide protection when this happens.If the organization indemnifies the directors, D&O insurance can reimburse the organization for the costs.

D&O insurance can also provide entity coverage when both the company and directors are named in a lawsuit.Who Needs D&O Insurance? Many D&O claims involve shareholder and securities lawsuits.For this reason, D&O insurance is important for public companies and companies in the process of going public, but private companies can also benefit from coverage.

Coverage is also important for non-profit organizations and the board members who serve them.A few situations where D&O coverage could apply include: The D&O Market In recent years, a combination of factors caused D&O rates to surge while markets shrank.The Council of Insurance Agents & Brokers (CIAB) says D&O rates increased by 16.8% in the second quarter of 2020, 16.1% in the third quarter, and 14.7% in the fourth quarter.

Additionally, 82% of survey respondents reported a decrease in underwriting capacity in the second quarter.Likewise, 2021 was a challenging year for the D&O market, with CIAB reporting a 13% rate increase in the fourth quarter.The D&O market showed signs of improvement in 2022 – CIAB says rates increased by 7.3% in the third quarter.

Lockton says the rate moderation trend should continue in 2023 but notes this is due to increased capacity and new players in the market.The underlying underwriting conditions that caused rates to spike have not changed.Are You Protected? Many current trends can lead to D&O exposures, including cyberattacks, DEI and ESG concerns, and the threat of a global recession.

Directors and officers have to navigate all of these threats while keeping their companies profitable – it can be a thin line to walk.The recent rate moderation and increased capacity should provide some relief.However, since risks are still high, you should see this as an opportunity to make sure you have the coverage you need.

BNC Insurance Agency can help you review your D&O insurance needs.Request a quote.