A Towers Perrin news release said that more than 66% of respondents got such inquiries in 2006 – a 16% increase from 2005. Nonprofit respondents received similar D&O inquiries from approximately 32% of their boards, a slight increase (3%) from 2005.
The poll found that companies are responding to these inquiries by providing broader personal liability protection for directors and officers. In fact, 14% of those surveyed purchased Side A-only coverage in the past year, which provides D&O coverage for personal liability when directors are not indemnified by the organization.
According to the announcement, at public companies, 38% reported purchasing a Side A-only D&O policy this past year. Notably, the majority of stock option backdating claims seen so far have resulted in shareholder derivative claims, a common source of Side A D&O claims, Towers Perrin said.
Among repeat survey participants, there was a 53% increase in organizations that purchased a Side A-only D&O policy. Twelve percent of repeat participants purchased such a policy, up from 8% in 2005.
Companies also saw a cost decrease in 2006 for the liability product. Towers Perrin ‘ s D&O liability insurance average premium index dropped 18% in 2006, after dropping 9% in 2005 and 10% in 2004. For repeat participants, the average premium reduction was 6.5%.
Consistent with the 2005 survey, 15% of participants in 2006 reported increasing their D&O limit. The average limit purchased across all participants was $11.55 million, a reduction from 2005 that is based largely on increased participation by smaller organizations. If new participant data is excluded, repeat participants reported an 8% average increase in limits across all asset sizes, from $9.31 million to $10.23 million.
The Towers Perrin survey, which included 2,875 participants, is the 29th in a series of studies on D&O liability insurance purchasing and claims trends.
The full report is available here .
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