The pace of public directors and officers liability insurance price decreases again slowed in the fourth quarter of 2023, with the average price per $1 million in limits dropping by 17.5%, according to Aon’s Quarterly D&O Pricing Index.
Aon noted the Q4 decrease is the seventh consecutive quarter of year-over-year price drops after 17 quarters of pricing increases. Pricing decreases moderated in the second half of 2023 after hitting an average 24.9% in Q1 and 26.8% decrease in Q2.
Looking at programs that renewed in both Q4 2023 and Q4 2022, pricing decreased by an average 17.9%. Q4 also renewals included several clients with initial public offerings and special purpose acquisition company transactions that received significant decreases – 45.9% on average for IPOs and 37.2% on average for SPAC deals. Excluding these renewals, the average price per million dropped 14.4% in Q4.
The Pricing Index includes all limits purchased by public companies each quarter. According to the broker, examining primary policies that renewed with the same limits and deductibles as the prior-year quarter eliminates some of the “noise” around the comparisons. For Q4, that represented 82.1% of primary policy renewals.
Of those clients renewing with the same limit and deductible, 80% saw a price decrease while 13% saw flat renewals and 7% experienced a price increase. The average price decrease was 12.4% and the average price increase was 7%, for an overall average price change of -10%.
Aon found that 96.8% of clients renewed with the same limit, while 84% renewed with the same deductible. The vast majority (96.8%) renewed with the same carrier for primary policies in Q4, a slight drop from the 100% renewing with the same carrier in Q3.
For primary policies renewing with the same limit, deductible, and carrier, the average price change was a 10.5% decrease in Q4.
Breaking down the quarter by month, the gradual slowing of pricing decreases is more evident – in October 2023, 92% of primary policies renewed with a decrease, for an overall average drop of 11.4%. In November, that percentage shifted to 80% with an average decrease of 10.5% and 13% renewed flat. By December, just 58% of primary policies saw a decrease (average of 7.6%), 29% renewed flat, and 13% received price increases.
Aon also offered a perspective on the litigation landscape – for the full year of 2023, securities class action filings were up 8.1% at 213 filings compared to 197 in 2022. The 213 filings is just ahead of the 212 cases filed in 2021, but well below the high-water mark year of 2017, when annual filings reached 411.