UK Directors' and Officers' Insurance 2009
Datamonitor
November 11, 2009 SKU: DFMN2500490
|
|
Countries covered: United Kingdom
Introduction
This report provides a detailed analysis of the current trends and issues in the UK directors' and officers' market. More specifically, it examines the size of the market, demand, profitability, claims, distribution and who the main players are within the market. Finally, it presents Datamonitor's forecast of total directors' and officers gross written premiums up to 2013.
Scope- Estimates of the size and growth of the UK directors' and officers market.
- A discussion of what the key trends are affecting profitability.
- An insight into SME purchasing patterns.
- Information on the main competitors active in the UK directors' and officers' market.
Highlights
The total UK directors' and officers' insurance (D&O) market is estimated to have grown from £445m in 2007 to £468m in 2008, as measured by gross written premiums (GWP).
Despite the increasingly risky nature of writing directors' and officers' insurance during the current climate, most insurers are still making profits from their D&O portfolio, and this will remain the case for the foreseeable future. In 2008, there were no large commercial (non-financial) losses within the UK market.
D&O distribution is almost entirely confined to the large national and regional brokers that are able to facilitate the large administration costs required to place a D&O policy.
Reasons to Purchase- Gain an understanding of the key factors affecting the market and the current state of the competitive landscape.
- Develop your knowledge of the key purchasing patterns of SMEs in order to target exactly what clients need during the economic downturn.
- Adjust your ambitions within this market by using Datamonitor's forecast for total market growth up to 2013.
|
- Overview
- Catalyst
- Summary
- Executive Summary
- The total UK directors' and officers' insurance market grew by 5.2% to £468m in 2008
- Stabilizing rates in some lines and greater product penetration led to higher levels of GWP
- Directors' and officers' insurance distribution is dominated by brokers
- The strong level of expertise that brokers have make them the primary route to market
- There has been a small growth in online delivery for brokers from insurers over the past few years
- AIG, ACE and Chubb remain the top three UK directors' and officers' insurance carriers
- Despite its exposure to the sub-prime crisis, AIG UK still remains in healthy shape
- ACE has grown its market share due to growth in new business
- Chubb also managed to increase its market share, rising to 19% of the market
- The UK directors' and officers' insurance market is forecast to grow to £596m by 2013
- Rate increases and increased penetration of SMEs will lead to GWP growth
- Table of Contents
- Table of figures
- Table of tables
- Market Context
- Introduction
- The total UK directors' and officers' insurance market grew by 5.2% to £468m in 2008
- Stabilizing rates in some lines and greater product penetration led to higher levels of GWP
- The rate of decline of D&O premium rates has been falling recently in line with greater claims risk
- Unsurprisingly, financial institutions are seeing the largest rate increases in the UK
- FTSE100 Chemical, natural resources and pharmaceutical companies pay the highest average premium
- Demand for D&O is robust despite the difficult financial climate
- FTSE 100 companies are buying 20% more D&O cover than they were 12 months ago
- Insurers are competing heavily for new business within the smaller end of the market
- In line with greater SME uptake, more brokers are expected to introduce D&O to their product range
- The D&O market remained profitable in 2008 although much less so than previous years
- Profit margins will be squeezed due to broad coverage and low rates, which has left many exposed
- Perversely, the anticipation of a hardening market has further depressed rates, squeezing margins
- In Europe, a number of major reinsurers are withdrawing liability treaties, resulting in higher reinsurance costs and lower margins
- Claims are likely to rise due to the recession, with insolvencies and employment-related claims major drivers
- D&O claims have not seen any significant growth in the UK as of yet, although the future is uncertain
- Claims notifications are on the rise, but these may not necessarily lead to a greater number of claims
- Ballooning insolvencies are expected to increase claims by disgruntled workers and stakeholders
- The recession has put pressure on SMEs and is resulting in more insolvencies
- The majority of D&O claims are associated with employment issues
- Data from the Tribunals Service shows a significant rise in dismissal- and redundancy-related claims
- Several issues may cause a further increase in directors' and officers' insurance claims
- Litigation funding companies may contribute towards greater claims activity
- Disputes regarding the exhaustion limits triggering excess layers may become more common
- The Health and Safety (Offences) Act will increase the penalties for those that break health and safety law
- Different trends are in evidence in the US and UK directors' and officers' insurance markets
- D&O premium rates in the UK are diverging compared with the US
- In the US, financial institutions paid the highest average D&O premiums in 2008
- The US has experienced a flood of class action filings, which may also affect the UK market
- Typically, there is a lag between the notification of a class action and settlement
- While similar, the US and the UK are not directly comparable when comparing class action lawsuits
- Distribution Dynamics
- Introduction
- Large national brokers continue to distribute the vast majority of commercial insurance
- Independent insurance intermediaries of all types retained their majority market share in 2008
- Direct players account for a small but growing portion of the commercial general insurance market
- Some D&O insurers are looking at going direct, while others are delegating more authority to brokers
- Corporate partnerships have maintained only a small presence in the commercial insurance market
- Banks and building societies distribute negligible amounts of commercial general insurance
- Directors' and officers' insurance distribution is dominated by brokers
- The strong level of expertise that brokers have make them the primary route to market
- There has been a small growth in online delivery for brokers from insurers over the past few years
- Commercial liability products are likely to remain brokered for the foreseeable future
- The vast majority of SMEs use brokers for commercial insurance policies
- Brokers dominate among all sizes of SMEs, though they have greater market share among larger SMEs
- Face-to-face arrangement is popular in the market but is more prevalent among larger SMEs
- SMEs simply prefer to use the face-to-face channel as it helps simplify the problem
- Of those SMEs willing to buy insurance online or via the telephone, D&O was the least popular
- Package products are the principle means through which SMEs purchase their cover
- D&O SME penetration is one of the lowest compared with other commercial lines
- Approximately a quarter of SMEs surveyed buy directors' and officers' liability, suggesting there is further growth potential
- Only 15% of micro sized firms purchase directors' and officers' cover
- There is now a strong emphasis on assessing the right carrier for a D&O policy
- The current economic climate is prompting buyers of D&O insurance to assess their insurers solvency
- Insurer's financial stability is the number one concern for both brokers and clients alike
- Insurers need to know everything about their buyers
- Standalone, higher limit directors' and officers' cover is becoming more popular among buyers
- Non-price aspects of D&O contracts need extra attention for buyers, especially for smaller businesses
- Competitive Dynamics
- Introduction
- AIG, ACE and Chubb remain the top three UK directors' and officers' insurance carriers
- Despite its exposure to the sub-prime crisis, AIG UK still remains in healthy shape
- ACE has grown its market share to 21% due to growth in new business
- Chubb also managed to increase its market share, rising to 19% of the market
- The remainder of the market is characterized by smaller and often excess insurers
- Zurich recently extended its D&O cover for derivative claims
- Allianz has an estimated 7.5% share of the D&O market
- QBE had a 5% share of the market in 2008
- The amount of D&O GWP written by the Lloyd's of London market declined slightly in 2008
- The proportion of D&O business written by the Lloyd's market decreased
- The majority of D&O cover written in the Lloyd's market is for financial institutions
- Due to its syndicated nature of underwriting, the Lloyd's market is becoming increasingly favorable
- Future Decoded
- Introduction
- The UK directors' and officers' insurance market is forecast to grow to £596m by 2013
- Rate increases and increased penetration of SMEs will lead to GWP growth
- The UK directors' and officers' insurance market will peak in terms of growth rate in 2010
- APPENDIX
- Definitions
- Employers' liability
- Professional indemnity
- Directors' and officers' liability
- A-side coverage
- B-side coverage (corporate reimbursement)
- C-side coverage (entity securities coverage)
- Attritional losses
- Employment Practices Liability
- Earned premiums
- Gross premiums
- GWP
- London insurance market
- Micro, small and medium sized enterprises (SME)
- Written premiums
- Methodology
- Primary and secondary research
- Exchange rate conversions
- Data on the Lloyd's market
- Datamonitor's SME Insurance Survey Q2 2009
- Datamonitor's commercial broker survey
- Competitor estimates
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- Overview
- Table 1: Total UK directors' and officers' GWP and growth rate, 2003e-08e
- Table 2: Quarterly movement in premium rates, Q2 2005-Q2 2009 (%)
- Table 3: UK company insolvencies, 2004-2009
- Table 4: Dismissal and redundancy related employment tribunals, 2005-08
- Table 5: Annual number of US class action filings, 2003-08
- Table 6: Status of US securities class action cases by year filed, 2003-08 (%)
- Table 7: Market share of distribution channels in the commercial general insurance market, 2004-08 (%)
- Table 8: Estimated market shares of leading UK D&O insurers, 2006-08 (%)
- Table 9: Lloyd's premium income and share of the total UK directors' and officers' market, 2004-08
- Table 10: Proportion of financial institutions and non-financial institutions offering directors' and officers' cover written in the Lloyd's market (%), 2004-08p
- Table 11: Key drivers affecting UK directors' and officers' insurance GWP, 2009f-13f
- Table 12: UK directors' and officers' GWP, 2003e-13f (£m)
- Table 13: Q: "What business sector are you involved in?"
- Table 14: Q: "How large is your company in terms of number of employees?"
- Table 15: Q: "How large is your company in terms of turnover?"
- Table 16: What proportion of your business is commercial insurance compared to personal insurance (in terms of premium income)?
- List of Figures
- Figure 1: UK D&O premium income was estimated to have grown for the first time since 2005
- Figure 2: UK D&O premium income was estimated to have grown for the first time since 2005
- Figure 3: Over the last year, the rate of decline of D&O premium rates has decelerated
- Figure 4: Surprisingly, the total number of insolvencies dropped slightly in Q2 2009, although they are still considerably higher on a year-for-year basis
- Figure 5: Dismissal- and redundancy-related employment tribunals have increased over the past 12 months
- Figure 6: Compared with 2007, 2008 saw a 27% increase in the number of US class action filings
- Figure 7: In 2008, no class actions were settled in the same year, indicating the market's medium-tail nature
- Figure 8: Brokers still remain the dominant route to the market for UK commercial insurers
- Figure 9: Unlike commercial motor, the liability line is expected to see minimal business go direct
- Figure 10: Brokers have the highest penetration among medium-sized firms
- Figure 11: Micro SMEs are most comfortable with arranging their cover over the telephone
- Figure 12: There are a variety of reasons why SMEs do not use the telephone and internet channels
- Figure 13: The majority of SMEs would prefer not to buy D&O cover over the telephone or internet
- Figure 14: Most SMEs will purchase their insurance in the form of a package
- Figure 15: Only a quarter of SMEs buy directors' and officers' insurance
- Figure 16: D&O penetration is very low among micro and small sized firms
- Figure 17: ACE and Chubb managed to gain market share in 2008
- Figure 18: Lloyd's insurers wrote £29.5m of D&O premiums in 2008, 5.4% less than in 2007
- Figure 19: The total UK D&O market will peak in terms of growth rate in 2010 and grow to £595.8m by 2013
More United Kingdom General Insurance Reports
Channel Metrics: Consumer Distribution Trends in UK Household Insurance (briefing) by
Finaccord Ltd.
Channel Metrics: Consumer Distribution Trends in UK Household Insurance is the most detailed and up-to-date guide to distribution trends in household insurance in the UK ...
2012: Trends to watch in insurance by
Datamonitor
This report provides a detailed analysis of trends which will impact the UK general insurance industry in 2012. This report covers the effects that these ...
General Insurance in the UK - Industry Market Research Report by
IBISWorld
General Insurance in the UK Businesses in this industry underwrite insurance policies relating to property, casualty, liability and other general risks. In underwriting insurance policies, general ...
Claims Management in UK General Insurance 2011 by
Datamonitor
This report analyzes UK motor, property and liability claims in terms of costs, frequency and competitor efficiency ratios. It also includes forecasts for up to ...
A Comprehensive Study Of The UK Insurance Companies & Agents Market In 2010, Rating & Valuing Each Of The 1000 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
See all reports like this >>
More United Kingdom Reports
A Comprehensive Study Of The UK Video Conferencing Equipment Market In 2010, Rating & Valuing Each Of The 30 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
A Comprehensive Study Of The UK Tableware Market In 2010, Rating & Valuing Each Of The 166 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
A Comprehensive Study Of The UK Surveyors & Valuers Market In 2010, Rating & Valuing Each Of The 943 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
A Comprehensive Study Of The UK Subsea Engineering Market In 2010, Rating & Valuing Each Of The 142 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
A Comprehensive Study Of The UK Structural Engineering Consultancy Market In 2010, Rating & Valuing Each Of The 300 Companies That Operate In Today's Market by
Plimsoll Publishing Ltd.
The Plimsoll Analysis provides you with the most up to date and comprehensive analysis of the top 9 companies operating the market. It is ...
See all reports like this >>
Share this report
Other tasks Related Markets General Insurance Reports Free Alert Me service Receive bi-weekly email alerts on new market research Sign Up Today!
|
