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

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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there will be a lag before the true impact of the pandemic is known, particularly as government support packages are withdrawn.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

UK D&O insurance market, by company size

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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

UK D&O insurance market, by key players

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Market report scope

Key companies AXA, Zurich, Aviva, Allianz, Markel, Chubb, RSA, Angel, Lloyd’s and Hiscox

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.

AXA
AXA XL
Lloyd’s of London
Marsh
Zurich
Willis Towers Watson
AXIS
Argo
Neon
Pioneer
Chubb
AIG
RSA
Markel
Allianz
Aviva
Hiscox
Angel
Berkshire Hathaway
Beazley
Convex
Inigo
Equity Red Star
Mosaic
SCOR
Arcadian

Table of Contents

Table of Contents

1. Executive Summary

1.1 Market overview

1.2 Key findings

1.3 Critical success factors

2. Market Dynamics

2.1 Exceptionally hard conditions have driven market growth

2.2 The number of companies with D&O cover remains stable

2.3 D&O profitability may be improving, but the risk landscape is dynamic and concerns remain

3. Competitive Landscape

3.1 There have been significant shifts in appetite

3.2 AXA remains the market leader for SME D&O cover

3.3 AXA is also the favored insurer for D&O placement among brokers

3.4 Competition is starting to re-emerge

4. Product Distribution

4.1 SME buying habits have been largely unaffected by the hard market

4.2 Switching has increased, but only among the smallest SMEs

5. Future of the Market

5.1 UK D&O market growth is forecast to stabilize to 2025

5.2 COVID-19 impacts could still significantly affect the market

5.3 Other factors that could impact D&O

6. Appendix

6.1 Abbreviations and acronyms

6.2 Definitions

6.3 Methodology

6.4 Secondary sources

6.5 Further reading

About GlobalData

Contact Us

Table

List of Tables

Table 1: The impact of COVID-19 on D&O policyholding considerations among SMEs, 2021

Table 2: Examples of regulatory and legislative changes imposing new obligations on directors

Table 3: Method most recently used by SMEs to purchase D&O by size of SME, 2021

Table 4: D&O switching levels and behavior at last renewal by size of SME, 2021

Table 5: The main reasons for switching D&O provider have changed over the hard market

Table 6: UK D&O GWP, 2017-25f

Table 7: Economic and regulatory indicators that will impact the future of the D&O market

Figures

List of Figures

Figure 1: UK D&O GWP increased substantially through the hard market

Figure 2: D&O penetration rises in line with company size and has remained stable overall

Figure 3: The proportion of small and medium companies that are first-time D&O buyers has increased

Figure 4: SMEs have reconsidered their D&O holdings as a result of the COVID-19 pandemic

Figure 5: Almost half of SMEs that canceled their D&O policy due to COVID-19 needed to cut costs

Figure 6: 10.1% of SMEs have made a successful D&O claim as a result of the COVID-19 pandemic

Figure 7: Company insolvencies declined during the course of the pandemic, but are creeping back up

Figure 8: AXA is the SME market leader for UK D&O insurance

Figure 9: AXA, Aviva, Zurich, and Allianz lead the way for D&O among commercial brokers

Figure 10: Brokers are the main channel used by SMEs to purchase D&O

Figure 11: Micro enterprises and sole traders are more likely to buy D&O with some form of personal interaction

Figure 12: Medium-sized companies are increasingly shopping around at renewal but switching levels have fallen in this segment

Figure 13: UK D&O GWP growth will stabilize after 2022

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