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The current pandemic saw insurance brokers experience a hardening of the professional and management liability market.

“COVID-19 already posed huge claim concerns for insurers, and directors and officers are being  more cautious when making difficult decisions to protect and promote their companies in the current hard economic situation around the globe ,” says David Agius, Business Development Manager at Island Insurance Brokers.

David Agius explains how ‘Directors and Officers’ insurance covers, commonly referred to as D&O, have become a regular part of a corporate company’s risk-management. These policies offer liability cover to the directors and managers of an organisation to protect them from claims which may arise from the decisions and actions taken within the scope of their regular managerial duties.

“What D&O’s do not cover are fraudulent, criminal, or intentional non-compliant acts or cases where directors obtained illegal remuneration or acted for personal profit. In fact, an increased commitment to corporate governance was also a factor that has led to more D&O exposures,” he added.

When COVID-19 began,  the underwriting strategy tightened, and carriers started requesting more information on the way the health and safety issues are being handled within the organisation with respect to Covid-19 pandemic. They are also requesting an outcome of the analysis of the impact of the virus on the business plan and the balance sheet and information on any employee restructuring.

“The current  scenario seems to be leading to a situation where a  few carriers are willing to provide terms. As a result, investors and prospective board members will be requiring greater protection whereas policyholders looking for insurance will only find expensive, coverage-compromised options.” points out Mr. Agius.

As the spread of COVID-19 continues to impact businesses’ bottom lines, directors and officers will continue to have broad liability exposure to shareholders, stakeholders, employees and the government.

Companies with stable financials and no increase in risk are likely to encounter above-average premium increases combined with more restrictive terms and fewer options when remarketing coverage. On the other hand, companies with any increase in risk factors will encounter significantly increased premiums combined with very aggressive and unavoidable exclusions.

Companies seeking professional coverage for the first time are already encountering higher premiums than just 5-8 months ago and should be prepared for an aggressive analysis of their financials and how they plan to meet their financial obligations over the next 12 months.

“Nonetheless, concerns are always justified,” he reiterates. “Given these future unknowns, as brokers, our best advice at the moment would be to shop aggressively, inspect terms extremely carefully and negotiate as best you can. Although the current outlook does not seem very positive, company directors should still address their insurance aspects as best they can,” concluded Mr. Agius.