Given D&O’s long tail nature (very little paid in year 1 and typically taking until year 4 to reach 60% of ultimate ), severity driven with inconsistent loss development patterns and heavily exposed to rising social inflationary trends (subject to the ingenuity of the plaintiff’s bar), D&O has proven to be difficult to adequately reserve and price.
After significant rate increases were achieved from 2019 to 2021, rate changes, particularly in Public D&O , turned negative in 2022 and continued downward in 2023.
To further exacerbate the above , pricing and reserving actuaries particularly for new, smaller and/or excess D&O markets may have to rely on publicly available D&O reports on loss ratios and rate changes , which may be misleading and subject to misinterpretation..
Learning Objectives:
Explain the shortcomings in available D&O industry data , including Schedule P, when being used for actuarial pricing and reserving analyses
Recognize the relatively poor reserving track record for D&O and the cloud of future uncertainty created by the over abundance of capacity and demand for growth
Articulate the current D&O Claim and Macro Trends with the latest updates
Explain the shortcomings in available D&O industry data , including Schedule P, when being used for actuarial pricing and reserving analyses
