D&O Pricing Falls 14.7% in Q3, Breaking 17 Quarters of Pricing Increases: Aon

Directors and officers liability pricing fell 14.7% in the third quarter, according to a recent survey.

Aon’s Financial Services Group’s Q3 2022 pricing index for the quarter ending on September 30 decreased to 1.57 from 1.96 in the prior-year quarter, the second quarterly decrease since Q4 2017. The average cost of $1 million in limits decreased 19.9% compared to the prior-year quarter.

The Aon report noted that Q3 2022 results were significantly impacted by a single large IPO client that purchased a multi-year program in Q3 2021 and, as such, was not in the current quarter. Adjusted for this single client’s exclusion, the pricing index decreased 14.7% in Q3 2022.

Almost all renewing companies renewed with the same limit (98.4%) and the same carrier (98.4%). Most renewals also renewed with the same deductible (89.8%) and limit and deductible (89.8%) These numbers are in line with historical data.

Still, the report found that almost half of renewing primary policies received a price decrease (46%), while about 38% saw virtually no change and approximately 16% saw an increase. Those renewing with the same limit and deductible saw an average price decrease of 9.4%, while the small percentage that saw a premium increase paid only 5.5% more. Overall, prices for primary policies were down 4%.

This 19.9% year-over-year decrease in Q3 D&O pricing index represents the second quarter of year-over-year decreases, breaking a 17-quarter streak of pricing increases for policies renewing with the same limits and deductible.

The pricing index includes all limits purchased by publicly traded companies during the quarter. Changes in clients renewing during the quarter, changes in limits purchased, or a shift in the mix of limits between ABC limits and Side-A-only limits can affect the index’s overall performance.