The D&O insurance landscape, both in Great Britain and globally, has experienced a great deal of turbulence in recent years, beginning with a capacity crisis between 2019 and 2020, resulting in an unprecedented surge in prices. However, in the last 12 months, we've witnessed a remarkable turnaround.
Higher rates have not only attracted new entrants to the market but also rekindled the interest of insurers who had previously been hesitant to embrace the level of risk. This resurgence in competition among insurers has sparked a direct battle on pricing, resulting in significant reductions in premium costs.
In contrast to the broader commercial D&O market, leisure and hospitality sector clients have generally experienced higher rates, although some decreases were noted in the latter half of 2022.
The charts below show the change in D&O liability insurance rate on line from April 2020 to March 2023 for the leisure and hospitality sector.
Source: Data from WTW FINEX FINMAR client placements, sourced as 13 July 2023.
The rate-on-line is calculated by dividing the premium by the limit of liability that is being purchased and expressing that as a percentage. This shows the proportional cost of the limit of liability being purchased by each client.
Our main GB D&O Market Update sets out the rates for sides ABC coverages while this Chart 1 includes side A and sides AB placements as well as management liability policies incorporating corporate legal liability and entity Employment Practices Liability (EPL) coverages.
Source: Data from WTW FINEX FINMAR client placements, sourced as 13 July 2023.
A combination of COVID-19 and the D&O hard market seems to have led to a change in insurers’ perception of risk in the leisure and hospitality sector. After a period of significant increases peaking in October 2021, the overall trend has been for rates to come down although they remain above the average D&O rates.
Proportion of clients who saw at renewal their primary layer renew flat, with an increase or a decrease.
Source: Data from WTW FINEX FINMAR client placements, sourced as 13 July 2023.
Proportion of clients who saw at renewal their excess layer renew flat, with an increase or a decrease.
Notifications in D&O claims have been on a downward trend since their peak in 2018. The general market position is set out below.
Source: WTW client notifications from GB placements only, between 1 January 2007 to 31 December 2022.
The position for the leisure and hospitality sector is slightly different, see below.
Source: WTW client notifications from GB placements only, between 1 January 2007 to 31 December 2022.
Between 2007 and March 2023, improper business practice losses were the most frequently notified type of loss by our D&O leisure and hospitality clients. These relate to breaches of regulations/legal requirements and include contract breaches; other civil liability matters and website/disability discrimination violations. The major loss type was health and safety: whilst only accounting for 15% of notifications made by leisure and hospitality businesses, it accounted for 48% in terms of costs. These events mainly relate to injuries to customers and members of the public. The other most frequent types of loss are generally expected for the leisure and hospitality sector (employee relations and theft and fraud in particular) but it is worth noting that share and bond holder complaints were the 5th most frequent type of loss and accounted for 18% of the cost.
Source: Retailers DO Claims Report 2023.
In our Global Directors’ and Officers’ Liability Survey, responses from directors and officers show that regulatory risk and health and safety risk were number 4 and 5 risks respectively (out of 28 risks overall), which is fairly consistent with the types of claims clients in the leisure and hospitality sector have experienced.
Source: 2022/2023 Directors & Officers Liability Insurance Survey.
Rates in the Leisure & Hospitality sector have not followed the general trendline and remain higher than for D&O more generally, albeit decreasing since 2021. The D&O market more generally has seen increased competition lead to significant reductions in rate on line, leading to some insurers expressing concern about the sustainability of current rates. We expect to see further reductions in the leisure and hospitality sector in line with general D&O market expectations.
