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D&O Insurance in the UK

  • December 2014
  • -
  • Finaccord
  • -
  • 24 pages

D&O Insurance in the UK is about the market for directors' and officers' liability cover in the UK. In addition to documenting the development of the market value from 2010 to 2014, the report also divides it for the most recent year for three key segmentations: between publicly listed corporate enterprises, unlisted corporate enterprises and other entities (e.g. non-incorporated businesses and the not-for-profit sector); between the financial services sector, the non-financial services sector and the manufacturing / primary sector; and between underwriters based in the UK itself and underwriters located outside of it.

These unique market splits are based in part on a survey of leading brokers and underwriters of D&O insurance in the UK. This same survey also identifies the underwriters of this type of cover used by brokers on a regular basis, gives an input into Finaccord's estimates for the market shares of underwriters of D&O insurance, provides a basis for commentary surrounding distribution channels used for this type of cover, informs observations concerning trends in claims by type of insured entity, and guides Finaccord's forecasts for the market value through to 2018.

Table Of Contents

DandO Insurance in the UK
0.0 EXECUTIVE SUMMARY 1
1.0 INTRODUCTION 3
What is this report about? 3
Rationale 3
Several factors underpin the rationale for the production of a study about DandO insurance 3
Methodology 3
Research program 3
Market data analysis 3
Definitions 4
DandO insurance 4
Policies are usually taken out by companies rather than by company managers… 4
… and typically pay for both defence costs and the damages paid to the claimant 4
DandO insurance can be bought by a variety of different types of entity 4
In Europe, policies typically incorporate Side A and Side B cover but not always Side C cover 4
Stand-alone cover bought for certain specialised risks is excluded from the definition of DandO insurance 5
Premiums 5
Sectors 5
Abbreviations 5
Exchange rates 6
Finaccord 6
2.0 MARKET ANALYSIS 7
Introduction 7
Regulatory background 7
There are two main types of corporate entity of interest in the context of management liability… 7
… although the introduction of limited liability partnerships created a third 7
Company law in the UK is defined mainly by the Companies Act of 2006 7
The UK Corporate Governance Code is also significant in the context of DandO insurance 8
The normal limitation period for breach of fiduciary duty is six years 8
Minority shareholders can bring claims on behalf of the company 8
Costs related to official investigations are an important trigger for DandO claims in the UK 9
Number of insurable entities 9
There has been some growth in the number of publicly listed corporate enterprises since 2010… 9
… but much more among unlisted companies with substantial annual revenues 9
The number of limited liability partnerships in the UK has now reached a substantial level 10
Market value, growth and segmentation 11
The value of the UK DandO insurance market is likely to have broken through GBP 500 million in 2014… 11
… and has been rising as a proportion of the wider general liability insurance sector… 11
… but relatively low insolvency-related claims among SMEs have limited growth in the market value… 12
… as has competition among underwriters, especially for non-financial accounts 12
A comparatively high proportion of DandO premiums in the UK is attributable to publicly listed companies… 13
… and financial institutions account for the lion's share of the total market value 13
Penetration levels 16
A small percentage of publicly listed enterprises has yet to take out DandO cover… 16
… and a much larger percentage of unlisted ones with sufficient revenues to make them core targets 16
Underwriter market shares and specialisms 17
At least 30 underwriters of DandO insurance compete in the broker channel in the UK… 17
… although three are likely to hold more than a half of the market value between them 18
Chubb's 'MASTERPLUS' policy is especially popular among privately held companies 19
Beyond the top seven underwriters, the UK market structure appears to fragment rapidly 20
Key brokers and broker specialisms 20
AXA, DUAL and W.R. Berkley have all introduced online quotation systems for DandO insurance 20
The leading brokers of DandO cover in the UK are mainly the leading brokers of commercial lines in general 20
Trends in claims and key risks 21
DandO insurance in the UK is profitable and has not seen any great increase in the value of claims paid… 21
… in spite of concerns in certain sectors, especially large banking institutions 21
Middle market financial institutions are considered to be relatively sound risks 21
Enforcement of regulations is a primary driver of claims in UK DandO insurance 21
Defence costs are likely to account for over three quarters of the value of all DandO claims paid in the UK 22
Future outlook 22
The value of the market is predicted to grow in both nominal and real terms up to 2018… 22
… but first-time buyers will not influence this greatly as these are mainly smaller organisations 23
3.0 APPENDIX 24
Brokers and insurers participating in the survey 24

LIST OF GRAPHICS / TABLES

0.0 EXECUTIVE SUMMARY 1
Key market data for DandO insurance in the UK 2
1.0 INTRODUCTION 3
2.0 MARKET ANALYSIS 7
Number of insurable entities segmented by legal structure, size and sector in the UK, 2014 10
Premiums for DandO insurance and the percentage of the total general liability insurance market that this
represents in the UK, 2010 and 2014 12
Segmentation of DandO insurance premiums in the UK between publicly listed corporate enterprises,
unlisted corporate enterprises and other organisations, 2014 13
Segmentation of DandO insurance premiums in the UK between the financial services sector, the nonfinancial
services sector and the manufacturing / primary sector, 2014 14
Ratio of DandO insurance premiums to gross value added in the financial services sector, the non-financial
services sector and the manufacturing / primary sector in the UK, 2014 (table) 15
Ratio of DandO insurance premiums to gross value added in the financial services sector, the non-financial
services sector and the manufacturing / primary sector in the UK, 2014 15
Segmentation of DandO insurance premiums in the UK between underwriters based in the UK and
underwriters based abroad, 2014 16
Proportion of publicly listed corporate enterprises and unlisted corporate enterprises with revenues above
EUR 10 million with DandO insurance in the UK, 2014. 17
Frequency of usage of specific insurance underwriters by major brokers of DandO insurance in the UK,
2014 18
Estimated market shares of DandO insurance premiums of underwriters in the UK, 2014 19
Segmentation of claims costs between defence costs and other claims costs in the UK in a typical year 22
Forecast premiums for DandO insurance in the UK, 2018 23
3.0 APPENDIX 24

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