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Fitch sees challenges ahead for US D&O liability insurers

Property and casualty insurers active in the directors & officers liability insurance market could find it difficult to maintain their underwriting performance in 2018 amid declining premium rates and challenging claims trends, Fitch Ratings said.

The rating agency expects D&O premium rates to continue to drop even as poorer overall U.S. P&C industry results and large catastrophe-related losses boost pricing of several individual market segments in property lines. But pricing risks could be mitigated should M&A activity impact market competition, according to the rating agency.

From a claims perspective, Fitch noted the growing number of securities class-action lawsuits as both traditional filings and merger objection-related claim filings rose.

The rating agency also said that public company executives' liability exposure continues to evolve, with courts' greater inclination to seek to hold executives individually accountable for corporate crimes adding to the personal exposure. Additionally, the rising number of cyberattacks is seen as an additional, newer source of D&O risk.

"D&O underwriters are typically larger, multi-line insurers that can absorb or offset potential large losses with results from other segments," Fitch said. "As such, the likelihood that the risks from the D&O segment will individually drive insurer ratings are limited outside of extreme crisis periods and events."