(updated with correction)
Some 25% of public companies increased their total limits in their directors’ and officers’ liability insurance programs, raising the mean average amount to $126.8 million per company, according to a Towers Watson survey released Wednesday.
According to “The 2011 Directors and Officers Liability Survey,” 69% of companies kept the limits the same at renewal, while 5% decreased limits and 1% weren’t sure.
The 2010 mean average was $118 million, while the median stayed at $100 million both years.
D&O insurance premiums fell at 62% of the public companies responding compared to their previous policy, stayed the same at 23%, rose at 14%, while 1% of respondents were unsure. “At the time of the survey we saw in the public company sector an abundance of capacity and a lot of competition” among D&O liability insurers, Lawrence A. Racioppo, Towers Watson executive practice leader and author of the report, said in an interview. “It was the whole supply-and-demand issue, although there is anecdotal evidence there shouldn’t be a price decline because of litigation.” The price decline assumes the company has a favorable risk profile, Mr. Racioppo added.
But the situation could change, he added, saying, “Insurers are looking to raise rates across the board.
Among other findings, 34% of responding public companies reported having D&O claims in the last 10 years.
Of the public companies having claims in the last 10 years, 69% of claims came from direct shareholder or investor lawsuits, while 65% of responding companies reported claims came from derivative shareholder or investor suits — generally litigation brought by a shareholder or investor on behalf of a company against an executive officer or director.
The numbers do not add up to 100% “because a given respondent may have had more than one claim in the past 10 years,” or “have had one claim with two or more allegations,” Mr. Racioppo said in an e-mail.
