In our February 8 posting we cited a RIMS Benchmark Survey showing that the Directors and Officers (D&O) line saw some of the largest decreases in premium rates in the fourth quarter of 2006. Now a Towers Perrin survey confirms this trend, noting that the average D&O premium dropped by 18 percent in 2006, after declines of 9 percent in 2005 and 10 percent in 2004. Both reports attribute the softening market to the sharp drop in the number of securities class action suits filed in 2006. While the moderation in prices is good news for D&O insureds and their agents and brokers, the Towers Perrin survey offers this note of caution: “We do not believe that the current improved risk profile will support prolonged soft market premium decreases if underwriters want to write this line profitability.” Indeed, in a speech to the Professional Liability Underwriting Society (PLUS) D&O Symposium earlier this year, John Degnan, vice chairman of Chubb, pointed out that if shareholder derivative claims are included, it appears that overall D&O claim frequency was up, not down, in 2006. Degnan went on to urge D&O insurers to be vigilant, lest the “perfect calm” turn out to be merely the eye of a larger storm. Wise words.