If CFOs move quickly, they can negotiate lower D&O premiums and better coverage.
After years of nightmarish increases, the price of Directors and Officers (D&O) insurance softened in the third quarter of 2004 and continued to drift down through the fourth quarter. Premiums stabilized this year and may head up again in 2006. But in the meantime, CFOs have an opportunity to field bids from multiple carriers, evaluate the quotes and negotiate the best coverage. Capacity is up, but so are claims, so companies that have not already looked for better value in their policies should act now.
"The most important factor influencing the D&O marketplace over the next year or two will be the manner in which existing capacity digests and reacts to the worsening claims environment," says Tony Galban, senior vice president and D&O underwriting manager at Chubb Group of Insurance Companies in Warren, N.J. "Whereas an influx of new capacity had a softening effect in 2004, it is unlikely this will be sustainable over time. Absent changes in the external liability environment, prices are likely to stabilize, if not firm up, within the next 24 months."
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