Tuesday, October 28, 2014

Q4 2014 Directors & Officers Insurance Update

Looking ahead to upcoming 2015 Directors & Officers renewals, here is what you can expect

Bottom Line:
Private companies can expect another year of double digit premium increases (10-15%).
Public companies can expect another year of high single digit premium increases (6-9%).
Note that this information applies to the market in general and does not mean that every policy will experience such increases.

Why?
Private company D&O claims are on the rise due primarily to the increase in mergers and
acquisition activity, data breaches and anti-competitive behavior.

All companies are at a higher risk of regulatory investigations, but FCPA, price fixing
and anti-trust investigations continue to hit public companies most.

Trends:
The IPO boom is expected to continue. Although valuations are much more reasonably today (which caused most of the IPO trouble in 2000) investor expectations are often not met –
leading Underwriters to expect continued increase in D&O claim activity.
According to Matthew Shulman, ESQ., a leading D&O Underwriter, in an online IRMI
webinar 10/16/2014, 7 IPOs issued in 2013 have already been hit with class action suits.
IPOs in 2013 totaled 157. IPOs in 2014 hit 112 by mid year – far exceeding 2013.

Data Breaches leading to shareholder derivative claims alleging mismanagement are
expected to increase. All companies, especially public, will be subject to much more
scrutiny of their network security (beyond hardware/software precautions). Executives will
need to proactively enact security measures to meet the increasing due-diligence
expectations of shareholders and stakeholders (customers, vendors, employees) alike.

Demand for private company D&O is on the rise. Executives and investors are taking
much more sophisticated approaches to their entrepreneurial ventures – each requiring
protection of their investment.

Action:
Consider supplemental Side A D&O coverage which only responds with defense coverage for the Ds & Os - no coverage for the entity. Entity coverage under private company
D&O policies is very broad and is being seen to frequently eat up policy limits, leaving little limit left for defense of the Directors and Officers. To ensure adequate coverage for the defense of the directors and officers, more private companies are adding separate Side A D&O coverage policies to their portfolio.

Address Cyber/Information and Privacy Liability Security exposures. Checklists for
identifying exposures, ranging in sophistication, are available upon request.
Precautionary measures suggested in these checklists can help to jumpstart your security program and ensure the most reasonable premiums if/when you decide to obtain such insurance.

Call me with any question or to review your coverage.

Carol L. Corporales, CIC, MLIS
858.202.6187

What Clients Are Saying About Carol Corporales...

Carol is not only a knowledgeable and accessible insurance professional, she's also personable and easy to work with. Her background in technology allows her to quickly understand what our company does, and to pro-actively solve problems that other brokers couldn't. We view her as a valued member of our team."

Office Administrator, E-Band Communications

See below for more comments about Carol.

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Other Comments About Carol's Work...



"I am always able to contact Carol directly and get a fast response, and she really knows commercial insurance. With Carol it's all about customer service."

Controller - Westerly Mechanical Corporation



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"My experience with Carol is that she goes way beyond the basics. She is thorough, timely and keeps me up to date. Best of all, she has our best interests at heart."


Court Shaw, CFO - Aethercomm, Inc.


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"Carol is not only a knowledgeable and accessible insurance professional, she’s also personable and easy to work with. Her background in technology allows her to quickly understand what our company does, and to pro-actively solve problems that other brokers couldn’t. We view her as a valued member of our team. "


Office Administrator - E-Band Communications


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" Carol's personal service and knowledge always exceed our expectations. She makes sure we are covered but not over-covered."


Director of Finance, REMEC Broadband Wireless