Directors' insurance liability rates soar on expectations bosses will face Covid-19 claims

Rates to insure executives more than double in UK, while insurance for public companies in the US climb 59%, broker says

The Lloyd's building, home of the world's largest insurance market Lloyd's of London. The organisation expects non-life insurers will pay out $100bn in Covid-19-related claims this year. Getty Images

Premiums for directors' and officers' liability insurance surged in the second quarter, broker Marsh said on Monday, as insurance underwriters fear the coronavirus pandemic will lead to hefty litigation claims.

Premiums for directors' liability insurance, known as D&O, in Britain rose by more than 100 per cent while in the United States, rates for public companies were up by 59 per cent, Marsh said in a quarterly commercial insurance survey.

D&O insurance protects company directors and executives against litigation costs.

Jonathan Turner, chief executive for speciality insurance at broker Gallagher, said D&O rates for public companies seen as particularly exposed to Covid-19 legal claims had risen by as much as 2,000 per cent.

Risk modelling company Praedicat said that by mid-July, more than 200 claims had been filed in U.S. courts against companies allegedly responsible for introducing and spreading COVID-19 in the United States.

James Whitaker, a partner at law firm Mayer Brown in London, said similar litigation was likely to follow in Britain.

Marsh's survey found that overall, global commercial insurance rates rose 19 per cent in the second quarter.

The rate rise was the highest since the broker began its commercial insurance rates survey in 2012.

"As insurers continue to work through claims in property and D&O, and with the full cost of Covid-19 still developing, upward pressure on pricing is anticipated for the balance of 2020," Dean Klisura, president of global placement and advisory at Marsh, said.

Lloyd's of London estimates non-life insurers globally will pay $100 billion (Dh367bn) in Covid-19-related claims this year.

Marsh said other large losses had also triggered premium rate rises, with insurance industry sources seeing more to come.

Insurance industry sources estimated insured losses of around $3bn from the explosion at the Beirut port warehouse last week. Risk modelling firm Karen Clark estimated insured losses of more than $4bn from Hurricane Isaias, which hit the United States and Caribbean over the past few weeks.