The continued soft excess D&O insurance market is helping to mitigate the upward pressure seen in the primary line. However, rates charged for the total program (primary and excess combined) are also trending upwards. Although the total limit rate still decreased an average of 0.76 percent and a median of 0.79 percent, it is considerably less than the average and median in 2011; 6.66 percent and 5.25 percent decreases, respectively.
Thirty-eight percent of D&O primary limit renewals experienced a rate increase in the first quarter of 2012; only 15.4 percent of programs saw rates increase in 2011. More than 60 percent of primary limit programs renewed with a decrease in rates in 2011, including 22.1 percent that secured decreases greater than 10 percent. Conversely, only 29.9 achieved decreases in 2012; only 11.5 percent of which achieved reductions greater than 10 percent. Thirty-two percent of primary policies renewed flat thus far this year, up from 23 percent in 2011.
Total program rates are also skewing up, although at a slower pace. In 2011, nearly four out of every five clients secured a rate decrease at renewal. In 2012, however, only 53.9 percent of insureds achieved premium savings. In contrast, more than 30 percent of clients experienced an increase at renewal in the first quarter of 2012, up from 10.1 percent who did so in 2011. An overall increase in total program rates seem to be mitigated, in some cases, by continuing downward pressure on excess rates.
Overall, the market remains relatively competitive, with abundant capacity. As underwriters continue to put upward pressure on rates—notably in the primary line—insureds are likely to renew with modest changes in rates, typically in a 10 percent decrease to 10 percent increase range. In fact, nearly 80 percent of programs have renewed in this range in so far in 2012.