Sponsored content: Matt Houghton, head of financial risks at RSA Insurance, discusses what brokers need to keep on top of in a changing D&O marketplace
1. What is your view of how the D&O market is developing at this moment in time?
We’ve seen rates soften over the last few years as capacity has re-entered post Covid-19, but there are still some strong headwinds for the D&O market.
Corporate insolvencies in 2024 are set to surpass last year’s thirty-year high, we’re seeing increased regulatory and shareholder oversight, the broadening of employee day one rights and increased cyber threats, all of which are potential triggers for claims.
Then, thinking about the cost of claims, we’ve also seen inflationary pressure push up legal defence costs, which normally make up the bulk of the claim.
2. What challenges are coming over the horizon for the D&O insurance sector and how can these be addressed?
There’s already been a lot of talk about ESG. We’ve had a few court cases in the UK to date, but it is still early days.
Another emerging challenge is artificial intelligence (AI). If you think about what D&O covers at its core, it’s the decisions being made while running a business.
AI has the ability to affect that business in a number of ways, whether that’s the accuracy of the data that comes out, the breach of confidentiality of feeding data in, or AI washing – the misleading marketing tactic that involves overstating the use of AI in a product or service.
Ultimately, AI will need to be regulated in the same way that every country protects its currency against counterfeiting, such is the potential impact on the global economy of it going unchecked, although at the moment development feels like it is outpacing legislation.
3. Does the change in government in the UK impact how brokers should approach their D&O clients?
Nearly half the world’s population live in countries holding elections this year, so that creates a lot of geopolitical uncertainty.
Looking at the UK, at the time of writing, the October budget has not yet been announced, but could include changes to business taxation and net zero transition goals.
The new government have also published its employment rights bill, which makes sweeping changes to rights at work along with a new enforcement body called the Fair Work Agency.
In short, brokers should be having conversations with all of their clients on the anticipated impact these changes will have on their business as they are rolled out.
4. In such a dynamic business line, what is the importance of underwriter expertise and experience for brokers?
It’s vital. D&O in an intangible class where what can appear at first glance a simple query can involve quite a bit of time in the policy wording to get to the answer.
D&O is a technical product and being able to rely on the experience and guidance of an underwriter is invaluable. That’s why we’ve invested in the ProFin, or professional and financial risks, team at RSA over the last few years and are proud to have almost 60 underwriters spread across the UK.
5. How can brokers approach the claims process in the best way possible for their clients?
We work in an industry where the value of our product isn’t always fully known at the time of purchase, so an experienced claims team is invaluable.
Claims teams can give advice and share their knowledge. Timely notification of matters means that we can be proactive, especially as some wordings have extensions for pre-investigations and mitigation costs.
The easiest broker or client visits I’ve ever attended are those where I’ve taken a member of the claims team with me, as they always add huge value.
