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Directors' & Officers' Insurance – What Buyers Need to Know

How do you feel about your insurance broker? If you’re dealing with Directors' & Officers' (D&O) insurance, your response may be mixed. A range of issues, including COVID-19, have brought the importance of brokers and insurance partners to the forefront. We asked our Professional and Executive Risk Leader, Raj Aujla, to give us his insight into the current state of D&O insurance in Canada.

Can you tell us a bit about your background in D&O insurance and risk management?

“I’ve been helping multinational companies manage professional and executive risks for more than 20 years. I led the team at Jardine Lloyd Thompson Canada (JLT) for nearly a decade, supporting a range of clients. I joined EQUA Specialty Risk Partners Corporation (EQUA) in 2020 – I’m thrilled to be utilizing my experience with a company that truly cares about protecting their clients.”

What’s going on in the D&O market today?

“The market for D&O policies has ruptured because of the rapid increase in claims. Policy language has been narrowed, coverage is further restricted, and exclusions are plentiful. The impact of mergers within the insurance industry over the past decade is becoming clear, emphasizing the need for a broker that puts their client’s risk strategy first.”

How did we get here?   

With over a decade of declining and depressed D&O pricing, many corporate insurance buyers benefited from insurers fiercely competing to capture a larger market share by broadening policy language and using their preferred weapon of choice, a price war.

Now, in light of COVID-19, insurers are mounting losses across their global D&O portfolios and are re-evaluating their underwriting appetite. Entire portfolios are facing extensive underwriting scrutiny, which has translated into many insurers taking action. Here are a few of the things we’ve seen insurers do recently:

  • Completely depart the D&O sector
  • Withdraw or reduce capacity from specific loss-prone industry classes
  • Narrow the breadth of policy coverage 
  • Increase pricing and retentions

I will not be surprised if further measures are taken as we move into 2021.”

What does that mean for people who need D&O coverage?

“It means reduced access and focus. D&O insurance is a highly specialized arena – mergers and acquisitions over the last decade have resulted in less access to both insurers and brokers who work within this realm.
Additionally, the insurance brokerage sector has devolved from a service industry to a sales industry. This has created a paradox in which greater emphasis is placed on the broker’s next account acquisition, leaving the fundamental well-being of their client’s risk strategy as a secondary consideration. Along  with heightened financial market volatility, these factors have resulted in the perfect storm for corporate boards evaluating their business partners in insurance risk management. They need support, clarity, and coverage, and they need it now.”

How do you combat these forces for your clients?

“I sit down and I strategize with them. Because I’ve dedicated my career to professional and executive risk, I have deeply rooted relationships and the experience to navigate this new landscape. That’s really what you need.

You need someone who is dedicated to the success of your business, who will explain risks, and help to mitigate them. At EQUA, we’ve built a team of like-minded people who truly care about the success of our clients. That means considering their needs from the overarching view of the board – it means working with clients and insurance partners to remove and mitigate uncertainties, diminishing exposure to corporate balance sheets and attendant personal liabilities. It means working hard and being transparent. That’s the key to success in D&O insurance, and that’s what we’re doing at EQUA.”

Are you ready to talk to Raj about D&O coverage for your team? 
Email him at today.

Raj Aujla, Executive and Professional Risk Leader 

Learn more about insurance coverage and risk management options for Professional and Executive Risk- visit our Specialty Expertise page