Earlier this year, her company forecast that average fiduciary liability premiums would rise 15% to 30% this year. "Now it's more like 20% to 30%," she said.
Next year, her firm predicts average premium increases of 25% to 40%. The firm's assessment is based on quarterly discussions with large providers of fiduciary liability insurance as well as monthly meetings internally to review clients' and carriers' "appetites" and actions, she said.
Ms. Dauparas said some higher education institutions are paying 100% to 200% higher renewal premiums for their 403(b) plans. They historically had lower premiums than for publicly traded companies and because 403(b) plans weren't being sued for ERISA violations until five years ago. "Consequently, carriers had not been adjusting fiduciary insurance terms prior to 2016 for this segment," she explained.
Ms. Dauparas and other insurance experts attribute the growing fiduciary liability insurance pressures to a general increase in ERISA lawsuits that spiked in 2020.
Plaintiffs' attorneys also have increased their challenges to DC plans with assets of less than $1 billion.
"No industry sector is immune," said Jay Desjardins, the Radnor, Pa.-based national fiduciary liability practice leader for Aon Financial Services Group, a unit of Aon PLC. "There is a common misperception that plaintiffs target jumbo plans over $1 billion."
According to Aon, at least 135 ERISA excessive fee lawsuits were filed since January 2020 with all but a handful being against DC plans.
There were 95 lawsuits in 2020 and 40 suits this year through August, according to Aon's research, which also shows at least 290 excessive fee lawsuits have been filed since 2005.
More than 40% of the 135 lawsuits were against plans with assets below $1 billion, Mr. Desjardins said. Of the 135, he added, 20% were against plans with less than $500 million in assets.
"We anticipate the (premium increase) trends will continue through 2021 and into at least the first quarter of 2022," he said.
When Aon polled 12 large fiduciary liability insurance providers, it asked what factors "typically impact pricing" for liability insurance.
An overwhelming majority said a "significant" influence on insurance premiums was whether a plan's investment committee does periodic plan administration benchmarking reviews, according to a July report. This question covered both DC and DB plans.
When asked specifically about DC plans, the report noted that company stock "remains a top concern for insurers." Most respondents cited concerns if a plan offered company stock with no investment limit for participants. That concern dropped significantly if plans placed a limit on participants investing in company stock. "This should come as no surprise given the history of lawsuits related to company stock," the report said.