Directors & Officers insurance market update


Shifts in the market are leading to improved conditions while emerging challenges create opportunities and demands.

After several years of premium increases, restrictive policy conditions and limited capacity, conditions in the Directors & Officers (D&O) market are stabilising, with cover becoming more available and affordable. An influx of new insurers (particularly from London markets) and generally broader market appetite has created healthy competition in the marketplace, especially for private companies, smaller listed companies, and excess layer policies.

According to a recent report published by global broker Marsh, D&O pricing in the Pacific region – where Australia is the largest market – reduced on average by 10% in the second quarter of 2023, and in some cases more. However, while conditions are steadily improving as competition grows, new, emerging exposures for company directors and officers will be a crucial focus for insurers going forward.

Environmental, Social and Governance (“ESG”) is high on the agenda with regulators and shareholders and has become a significant area of focus for insurers. In Australia, ASIC has issued greenwashing infringement notices (where a company makes false or misleading statements about the positive impacts their product or service has on the environment) to several major corporations and has commenced civil penalty proceedings in the Federal Court against both Mercer Superannuation (Australia) Limited and Vanguard Investments Australia for allegedly making misleading statements about the sustainable nature and characteristics of some of their investment options.

The regulator also recently published a media release highlighting six key areas that company boards and their advisors need to pay attention to for reporting purposes, all of which pertain to financial performance and clear disclosure. It is expected that Insurers will seek out underwriting information from both new and prospective clients regarding compliance with these concerns as part of the renewal process. A copy of ASIC’s media release can be found here.

Many industry insiders expect the improving market conditions to continue; however, ongoing economic and claims volatility will continue to be in focus for insurers as they reassess their budget projections and future appetite. Insurers will continue to favour certain risk types, with only the most appealing, well-managed risks being able to take advantage of the positive developments in the market, including the additional capacity that now exists.

For this reason, the performance of your insurance broker is crucial. As your exclusive representative, their ability to differentiate you in the market, separate you from the pack and successfully sell you as an attractive, well-managed risk to insurers is key to achieving the best possible outcomes.

Although pricing will not return to the lows of pre-pandemic or soft market levels in the short term, ensuring that you are working with the right broker is key to ensuring you are getting the best deal from the market.

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