United Kingdom (UK) Directors and Officers Insurance Market Size, Competitive Landscape, Product Analysis and Forecast, 2021-2025

The market has shown substantial growth that has been driven by extreme capacity reductions and stratospheric premium rate rises. While there are still some rate adjustments to be made during 2022, it is anticipated that by the end of the year there will be a return to flatter rates. The penetration of D&O among SMEs has remained largely stable. GlobalData’s 2021 UK SME Insurance Survey found that more than 30% of SMEs now have D&O (excluding sole traders), a figure that rises along with company size.

Over the last few years, the UK D&O market has undergone a significant market correction. Substantial premium rate increases – facilitated by drastically reduced capacity – have driven unprecedented market growth. The sector is also traversing the economic uncertainties and impacts of the COVID-19 pandemic, which could have a significant impact on the future course of the market. While claims are emerging, there will be a lag before the true impact of the pandemic is known, particularly as government support packages are withdrawn. As the hard market gradually improves profitability, the appetite of existing insurers and new entrants is expected to increase, and competition will re-emerge. Market growth is therefore forecast to stabilize until 2025.

What are the market dynamics of the UK directors and officers insurance market?

Until 2018, over a decade of soft market conditions in the UK D&O market caused gross written premiums (GWP) to hover at around GBP200m. The sector experienced high levels of competition and overcapacity, with correspondingly low prices and increasingly broad coverage terms, all of which were sustained by the historic (but ever eroding) profitability of the business. 2018 finally witnessed the much-needed turn in the cycle. Premium rates increased after several years of significant deterioration in underwriting results, as rising claims and increased exposure took their inevitable toll on profit margins.

Initially, large corporates – particularly listed companies and those with US exposure – felt the major brunt of the pain, experiencing significant premium rate rises. However, throughout 2019 rate increases filtered to all areas of the market, including SMEs. The outbreak of COVID-19 at the end of 2019, therefore, occurred during a hard market, when capacity had already been declining. Extreme uncertainty and fears over the potential systemic impact of COVID-19-related claims led to a further drastic reduction in appetite among insurers. Premium rate increases shot into the stratosphere, accelerating from the second quarter of 2020, as the scale and longevity of the COVID-19 pandemic became clear. This market correction has had a significant impact on the size of the UK D&O market. We estimate that the sector was worth GBP691 million in 2021.

Experienced insurers and brokers reported to GlobalData that market conditions during 2020 and 2021 were “brutal” and unlike anything they had seen before. Large, publicly listed companies continued to bear the brunt of the pain, with one interviewee describing the rate increases in this sector as “violent” and “almost unimaginable.” However, SMEs have been far from immune – all sectors of the market have been affected. Fears over the potential impacts of COVID-19 and an impending wave of claims accelerated the hard market into 2020. The withdrawal of AXA XL from London Market D&O in October 2020 further exacerbated conditions and left a significant capacity gap in the market. Other major insurers have also pulled back substantially, withdrawing entirely from certain sectors and not taking on new business across entire portfolios. Insurers have applied large blanket rate increases and substantially increased retentions, while introducing widespread policy exclusions and considerably reduced cover limits.

Several market incumbents spoke of the broad brush and indiscriminate approaches to portfolio correction that have occurred, affecting policyholders almost regardless of their claims history or business sector. Some of the industry sectors most affected by COVID-19 have seen the greatest premium rate increases and most significant reductions in capacity. Conditions in the aviation, hospitality, travel, leisure, and bricks-and-mortar retail sectors remain incredibly challenging and are difficult to place, with substantial reductions in cover limits and additional blanket exclusions, with specific requests for COVID-19 underwriting information. Care homes are also described as being exceptionally difficult to place.

What are the different company sizes with stable D&O penetration?

D&O penetration rises in line with company size and has remained stable overall. Appetite among medium-sized companies has increased, while fewer sole traders are purchasing cover for the first time. The percentage of first-time D&O buyers in GlobalData’s UK SME Insurance Survey provides some insight into levels of new business and how this might have been affected in recent years.

With the higher penetration levels of D&O among medium-sized businesses, a new business in this segment appears to have grown over the last few years. More than 8% of medium-sized D&O policyholders reported they had yet to renew their first D&O policy in 2021, in comparison to more than 4% in 2018. In contrast, there are signs that new business growth has slowed at the smallest end of the SME sector. This is particularly true among micro-enterprises and sole traders, where 12.0% of policyholders were new customers in 2018 compared to just more than 7% in 2021. The uncertain economic climate is likely to have impacted the number of these smallest SMEs that are prepared to take on additional or non-compulsory insurance.

UK D&O insurance market, by company size

For more segment insight, download a free report sample

Which are the key players in the UK D&O insurance market?

AXA, Zurich, Aviva, Allianz, Markel, Chubb, RSA, Angel, Lloyd’s, and Hiscox are the key companies in the UK D&O insurance market. The results of GlobalData’s 2021 UK SME Insurance Survey show that on a weighted basis AXA is the D&O SME market leader, followed by Aviva, Zurich, and Hiscox.

UK D&O insurance market, by key players

To know more about key players, download a free report sample

Market report scope

Scope

• The market substantial growth has been driven by extreme capacity reductions and stratospheric premium rate rises. While there are still some rate adjustments to be made during 2022, it is anticipated that by the end of the year there will be a return to flatter rates.
• Penetration of D&O among SMEs has remained largely stable. GlobalData’s 2021 UK SME Insurance Survey found that more than 34% of SMEs now have D&O (excluding sole traders), a figure that rises along with company size.
• More than 24% of SMEs have made a claim on their D&O policy as a result of the COVID-19 pandemic, with around four in fives claims accepted.
• Switching has increased among the smallest SMEs, while medium-sized companies are now more likely to have renewed after comparing prices (+7.0 percentage points compared to 2018).

Reasons to Buy

• Understand the current and forecast size and growth of the UK D&O insurance market.
• Gain insight into how the COVID-19 pandemic has impacted claims and product uptake.
• See what impact the hard market has had on SME switching and renewal behaviors.
• Benefit from GlobalData’s UK SME Insurance and UK Commercial Insurance Broker Surveys, as well as in-depth interviews with industry participants.
• Get access to D&O insurer SME market shares and understand broker preferences.
• Understand D&O product distribution trends.
• Learn how regulatory changes will affect the shape of the future UK D&O insurance market.