Marsh Notes Increase in UK Class Actions Spurs Coverage Demands

September 23, 2008

A combination of “class action contagion from the US and growing economic uncertainly have spurred an unprecedented surge in the demand for management liability insurance among the UK’s top firms,” according to a survey from Marsh.

Marsh indicated that, “two years ago only 10 percent of FTSE 250 companies were buying directors’ and officers’ (D&O) insurance to protect the personal assets of their directors. Today, the figure is nearer to 50 percent. Much of the demand is driven by the need to attract and retain high caliber candidates who increasingly require insurance in addition to any indemnities, which may be available from their company.”

Matthew Rolph, a Managing Director in Marsh’s Financial and Professional Practice, explained: “Major companies are becoming increasingly anxious to have insurance protection for the personal assets of their directors’ and officers’ (D&O). As the economy deteriorates the likelihood of litigation increases. We have seen that companies buying insurance are less concerned about price than ensuring that the terms and conditions of their cover are fit for purpose. Increasingly, this includes a much greater emphasis on the personal liability of directors.

“In the US, class action litigation has risen by 58 percent this year – even before the events of last week – and there is a strong likelihood that we will see an increase here. While the current economic problems began in the financial services industry, we are now seeing contagion into other industry sectors. We anticipate more litigation from disgruntled employees and shareholders. Enhanced scrutiny from regulators, which are collaborating across borders, has also increased the risks to top personnel.

“Despite the opportunities this presents to innovative insurers, we note a conservatism in the London insurance market’s appetite for these types of risks. There is a significant opportunity for insurers that can strike a balance between competitive pricing, cover and profitability. While rates for D&O continue to decline, it is uncertain how long that trend will continue.”

Marsh estimates the D&O market’s premium value at $8 billion globally, with the UK market standing at between $1 billion and $2 billion.

Source: Marsh – or

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