Fitch: D&O sees underwriting losses

Fitch Ratings expects underwriting losses to continue over the near term for the directors and officers (D&O) liability segment. This is despite a 67 percent cumulative increase in market premiums over the past two years, the agency states.

“The market has been disrupted by a confluence of challenging economic, regulatory, legal, investment and social factors since the pandemic’s onset, leading to a worsening claims environment. However, there is limited risk to ratings of individual insurers from weaker D&O segment results as leading carriers are larger, diversified entities,” read a statement.

Whilst direct written premium volume increased to USD10.7 billion in 2020 after years of flat to declining revenue growth, underwriting performance did not reflect similar improvement.

The industry direct incurred loss and defense and cost-containment (DCC) ratio declined modestly to 74 percent in 2020. Deterioration in results for the last four years are evidenced by a loss & DCC ratio averaging 75 percent from 2017-2020, in contrast with a 61 percent average during 2011-2016.