Directpremiums written virtually stayed flat while losses spiked in the directors andofficers liability insurance space in 2015, a year highlighted by theannouncement of an M&A deal involving two industry leaders, an S&PGlobal Market Intelligence analysis reveals.
In2015, the top 20 insurers writing D&O policies posted total direct premiumswritten of $5.81 billion, a 2.89% increase from $5.65 billion in 2014, whilethe whole industry saw total direct premiums written of $6.44 billion, only a0.08% increase from $6.43 billion a year ago. The industry growth rate comparesto about 7.0% in 2014, 5.9% in 2013 and 6.9% in 2012.
Despitethe slowdown, some insurers saw major premiums growth. jumped to 11thplace in the rankings from 17th place a year ago after growing direct premiumswritten by 27.3% to $146.4 million in 2015 from $115.0 million in 2014.
WhileAmerican International GroupInc. held on to the top spot of the market share rankings, M&Aactivity among D&O insurers shook up the rest of the rankings.
Followingthe mergerbetween ACE Ltd. and ChubbCorp., ChubbLtd. is in second place to AIG with a 14.35% market share. In 2014,Chubb Corp. ranked, on a stand-alone basis, third with 9.15% share of themarket and ACE ranked seventh with a 4.90% share.
camein fourth place in the 2015 ranking, with 8.75% market share, following itsacquisition ofHCC Insurance HoldingsInc. in a $7.5 billion deal. On a stand-alone basis, HCC Insurance had thefifth biggest market share at 5.09% in 2014, while Tokio Marine ranked ninthwith 3.57% market share.
Consolidationalso allowed for the entry of three new insurers in the top 20: , ICI MutualInsurance Co. a Risk Retention Group and These companiesedged out Cincinnati FinancialCorp., which ranked 19th in 2014, from the 2015 rankings.
Someof the insurers that saw the biggest drops in premiums written were andThe Hartford Financial ServicesGroup Inc. Zurich posted $205.3 million of direct premiums writtenin 2015, a 16.78% decrease from the $246.7 million it wrote in 2014. TheHartford wrote $103.0 million during the year, a 15.36% decrease from $121.7million a year ago.
FitchRatings in December 2015 noted the rate declines in D&O insurance, saying it indicatedsoftness in U.S. P&C. AonPlc had also reported that D&O fell 10.3% in the third quarterof 2015.
Whilepremium growth slowed down for the industry, insurers writing D&O policiessaw direct incurred loss ratio jump to 57.48% during the year, up from 49.33%in 2014. The top 20 insurers in terms of market share saw direct incurred lossratio grow to 59.47% from 50.74%.
posted one ofthe biggest increases in loss ratios, with 74.59% direct incurred loss ratio2015, an increase of 3,436 basis points from its 40.23% loss ratio in 2014.Alleghany Corp.'s lossratio also jumped to 79.71%, up 3,319 basis points from 46.52% a year ago.
CNAFinancial Chairman and CEO Tom Motamed during the company's fourth-quarter 2015earnings call saidthat loss trends in the professional liability business are not affecting thewhole portfolio. He described the business as "lumpy," noting thatthe company writes big limits in public D&O and that they just saw a coupleof big losses during the quarter.
D&Oinsurance may also be included in commercial multiperil policies. According tostatutory filings, the estimated direct earned premium for D&O insurance incommercial multiperil polices was $23.0 million for the industry for 2015, with$19.4 million of that amount earned by Arch Capital Group Ltd.
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