Tag Archives: Directors and Officers Liability

Marsh: Health Care D&O Risks Rise As Reform Takes Effect

Health care organizations are facing a much more challenging directors and officers (D&O) liability insurance market as they adapt to changes arising from the Affordable Care Act (ACA), according to a new report from Marsh.

It reveals that average primary D&O rates for midsize and large health systems increased by 9.6 percent in the third quarter of 2013, while total program D&O rates renewed with 7.9 percent increases on average.

Nearly all organizations – 91 percent – renewed with rate increases, according to its findings.

Marsh notes that since the passage of the ACA in 2010, the health care industry has undergone rapid consolidation resulting in organizations working more closely together and sharing information.

As a result, many health care organizations face increased exposure to antitrust risks and this has insurers concerned.

In some cases D&O insurers have lowered their antitrust sublimits and increased antitrust-related coinsurance requirements and retentions, Marsh says. In addition to raising rates, some D&O insurers are also pulling back on offering full policy limit defense coverage.

It quotes Mark Karlson, Marsh’s FINPRO Health Care Practice Leader:

Ongoing merger and acquisition activity and the transition to accountable care organizations and similar networks are creating new exposures for many health care organizations, including antitrust risks.

This has resulted in a much more challenging D&O market for health care companies. Risk managers should expect to face additional rate increases in 2014 and be prepared to provide underwriters with detailed answers about their response to health care reform.”

PC360 has more on this story.

Check out I.I.I.  information on  D&O liability insurance.

Towers Watson: D&O Marketplace Firming

The directors and officers liability insurance market is firming, with increased pricing being experienced in many sectors, according to an annual survey conducted by Towers Watson.

Towers Watson’s 2012 Directors and Officers Liability (D&O) Survey found that 41 percent of respondents in the private/not-for-profit space, and nearly 30 percent of public companies indicated that their premiums had increased in 2012.

In a press release Larry Racioppo, vice president, executive liability group, Towers Watson, and author of the survey, says:

Increasing claim activity, including D&O and employment litigation, coupled with inadequate pricing and retentions in the private and nonprofit space, are all driving insurers’ need for pricing increases.†

In 2012, directors and officers were more likely to ask about the amount and scope of their D&O coverage than last year, perhaps due to concern over the litigious environment, Towers Watson said.

This was particularly true of private companies, where 70 percent of respondents reported receiving an inquiry as to the amount and scope of their D&O coverage, up from 58 percent in 2011.

Regulatory actions continued to be a significant source of concern among directors and officers in 2012, with 83 percent ranking it as a top three concern.

In fact the biggest jump in directors and officers liability insurance claims in 2012 was brought about by regulatory actions, increasing to 23% of responses from 19% in 2011 and 16% in 2010.

Towers Watson noted the increased concern over regulatory litigation may reflect new laws put in place since the financial crisis, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as an increase in whistleblower bounties.

Check out I.I.I. facts+stats on D&O liability insurance here.

Gulf Oil Spill: Hearings and D&O Claims

All eyes are on Capitol Hill today where two separate Senate hearings get underway to examine issues and impacts of the recent Gulf oil spill. This is the first time that officials at the corporations involved in the spill, including BP, Transocean and Halliburton, will testify about the Deepwater Horizon accident.

This morning’s hearing before the Senate Committee on Energy and Natural Resources will be followed by an afternoon hearing before the Senate Committee on Environmental and Public Works. An article in the Wall Street Journal describes how the companies are trying to shift blame for who bears ultimate responsibility for the April 20 rig explosion and fire.

Meanwhile, a BP investor has filed a shareholders’ derivative lawsuit against the company’s chief executive officer Tony Hayward and its board of directors in Louisiana. The complaint alleges that BP has a long history of ignoring crucial safety issues related to the operation of offshore rigs such as the Deepwater Horizon rig, including problems with the blowout preventer devices that so spectacularly failed during this disaster.

Over at the D&O Diary, Kevin LaCroix offers his take on this lawsuit and what it may mean for BP’s directors and officers:

Where the BP derivative litigation may ultimately head remains to be seen. At a minimum, BP’s directors and officers face the prospect of enormous expense defending against this litigation, and significant potential liability.†

LaCroix goes on to note that this lawsuit represents yet another example of a company domiciled outside the United States facing a D&O claim in the U.S. courts. The susceptibility of non-U.S. companies to U.S.-based D&O litigation is a topic of recurring interest, not least to D&O insurers, he adds:

The most obvious concern to insurers is the extent to which non-U.S. companies face threats of D&O litigation in the U.S. and therefore should be paying D&O premiums commensurate with the existence of the U.S.-based litigation exposure.†

Check out the I.I.I. release on how insurance and reinsurance markets will play a key role in covering oil spill related claims in the Gulf. Check out an I.I.I. backgrounder on offshore energy facilities and insurance considerations.