"D&O insurance is a very, very interesting area and will become even more so," Axel Theis, the head of Allianz Global Corporate and Specialty AG, said at a press conference in Munich. “Premiums are rising in financial institutions coverage, but that hasn’t yet spilled over to other lines.”
Companies routinely buy D&O coverage from insurers such as Munich-based Allianz, American International Group Inc., XL Capital Ltd. and Chubb Corp. to protect executives from claims and legal costs related to management decisions. D&O rates, falling since 2003, will probably rise or stabilize next year, depending on the industry, Allianz said.
For financial institutions, prices may increases 50 percent to 60 percent, said Hartmut Mai, global head of financial lines at Allianz’s industrial insurance unit.
“The financial lines business will be negative in 2009, but that does not bother me too much as we have already seen the peak of claims in industrial lines and thus are more optimistic for 2010 and 2011,” Theis said. “Furthermore, as D&O claims can take some time to materialize, we are reserving very conservatively.”
D&O insurance doesn’t cover executives’ dishonest or fraudulent acts. Most policies include legal defense costs if a claim is brought in relation to an action that wasn’t intentional.