Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Growth in the directors' and officers' insurance market stagnated in 2006 2
The directors' and officers' market remained very static in 2006, staying at a value of around £450 million 2
Product penetration increased as new policyholders entered the market 2
Growth was hampered by competition which led to a fall in premium rates of around 10 per cent in 2006 2
Distribution of directors' and officers' insurance occurs largely through brokers 2
Large commercial brokers dominate the directors' and officers' market 2
AIG, ACE and Chubb lead the market, followed by insurers such as Royal & SunAlliance and Zurich 3
AIG, ACE and Chubb are the three largest UK players 3
The top three are followed by a group of smaller D&O players, including Royal & SunAlliance, Zurich, Allianz and Markel 3
The forecast presented predicts that the market will stabilize at the end of 2008, allowing for rate increases in 2009 3
Directors' and officers' GWP is predicted to grow to £630 million by 2011 3
Table of Contents 3
Table of figures 4
Table of tables 5
Chapter 1: Introduction 6
What is this report about? 6
Who is the target reader? 6
How to use this report 7
Chapter 2: Market Context 8
Introduction 8
Growth in the directors' and officers' insurance market stagnated in 2006 8
The directors' and officers' market remained very static in 2006, staying at a value of around £450 million 8
Growth in GWP stagnated as increasing product penetration was countered by soft market conditions and premium rates decline 10
Product penetration increased as new policyholders entered the market 10
However, growth was hampered by competition which led to a fall in premium rates of around 10 per cent in 2006 11
A favorable claims experience in 2006 helped maintain intense competition for market share 11
The market made an underwriting profit in 2006, although claims could rise going forward, leading to a fall in profitability 11
2006 was profitable, but continued competition meant that returns were lower than in 2005 for some players 11
The Companies Act could lead to more claims in the future, negatively affecting profitability 11
Chapter 3: Distribution 13
Introduction 13
Distribution of directors' and officers' insurance occurs largely through brokers 13
Large commercial brokers dominate the directors' and officers' market 13
Wholesale brokers are losing market share to other brokers 13
The use of e-trading platforms has increased significantly in the D&O market 14
E-commerce has become more commonplace, driven by the need for fast responses and cost efficiency 14
Electronic platforms are being used to improve communication between brokers and insurers rather than for direct sales 14
Chapter 4: Competitive Dynamics 15
Introduction 15
AIG, ACE and Chubb lead the market, followed by insurers such as Royal & SunAlliance and Zurich 15
AIG, ACE and Chubb are the three largest UK players 15
The top three are followed by a group of smaller D&O players, including Royal & SunAlliance, Zurich, Allianz and Markel 15
Smaller players Hiscox and Dual Corporate Risks have focused on increasing the size of their D&O books 16
The Lloyd's share of the D&O market declined in 2005, to 8.1 per cent 17
Having risen significantly during 2002 and 2003, Lloyd's business in the UK D&O market was scaled back in 2004 and 2005 17
Chapter 5: The Future Decoded 19
Introduction 19
The forecast presented predicts that the market will stabilize at the end of 2008, allowing for rate increases in 2009 19
Variable factors such as claims costs, premium rates and legislation will affect future GWP growth 19
Directors' and officers' GWP is predicted to grow to £630 million by 2011 20
Appendix 23
Supplementary data 23
Performance Ratios 27
Methodology 34
Primary and secondary research 34
Data on the Lloyd's market 34
Datamonitor's commercial broker survey 34
Competitor estimates 34
Definitions 34
Employers' liability 34
Professional indemnity 34
Directors' and officers' liability 34
Earned premiums 35
Written premiums 35
GWP 35
NWP 35
Further reading 35
Ask the analyst 35
Datamonitor consulting 35
General insurance research and analysis team 36
Disclaimer 36
List of Tables
Table 1: Directors' and officers' GWP, 2003 to 2006 9
Table 2: Lloyd's premium income and share of the UK directors' and officers' market, 2001-5 18
Table 3: Forecast GWP for the directors' and officers' insurance market, 2003-11f 22
Table 4: Total liability GWP by competitor, 2000-5 24
Table 5: Total liability GWP by competitor, 2000-5 (continued) 25
Table 6: Total liability market share by competitor, 2000-5 26
Table 7: Total liability market share by competitor, 2000-5 (continued) 27
Table 8: Commercial liability competitors by loss ratio, 2001-5 28
Table 9: Commercial liability expense ratio by competitor, 2001-5 29
Table 10: Commercial liability combined ratio by competitor, 2001-5 30
Table 11: Commercial liability commission ratio by competitor, 2001-5 31
Table 12: Commercial liability management expense ratio by competitor, 2001-5 32
Table 13: Commercial liability net gross premium ratio by competitor, 2001-5 33
List of Figures
Figure 1: Growth in the directors' and officers' insurance market stagnated in 2006 9
Figure 2: Datamonitor's broker survey results show that the directors' and officers' market is expected to see the strongest growth in 2007 10
Figure 3: AIG, ACE and Chubb were estimated to be the leading three insurers in 2006 17
Figure 4: GWP written in the Lloyd's market declined in 2004 and 2005 18
Figure 5: Key to the relative importance of forecast variables 20
Figure 6: Key variables affecting the UK directors' and officers' insurance market, 2007-11f 20
Figure 7: The UK directors' and officers' insurance market is forecast to reach a value of £630 million in 2011 21