Directors & Officers premiums on the rise

Directors and officers liability insurance rates will likely more than double for some sectors in the wake of the COVID-19 pandemic, as insurers respond to increased shareholder litigation over the past three years and future litigation over coronavirus-related exposures, according to a report by A.M. Best.

The report rating agency noted that rates have already increased significantly in 2020 with an on average increase of 20% in the second quarter.

“We can expect triple-digit rate increases in a post-COVID world, as insurers respond to legacy issues such as increased litigation, litigation financing, and keeping up with emerging claims and litigation due to COVID-19,” Best said in its report.

Securities class-action lawsuits have been at “elevated levels” since 2017 and third-party funding of legal cases, where litigation financing firms provide advances to plaintiffs in return for a share of any settlement, is becoming increasingly common, the report said.

COVID-19 claims will likely increase from industries hardest hit by the consequences of the pandemic, such as travel and leisure, Best said. In addition, claims may arise from lawsuits alleging inadequate disclosure by businesses and an increase in bankruptcies, the report said.