Willis Towers Watson survey captures D&O risk perceptions and key D&O insurance program considerations
Arlington, VA (July 19, 2018) – Cybersecurity ranked as the top directors and officers (D&O) liability concern for organizations today, while claims brought by employees, including claims for harassment or discrimination, and regulatory enforcement risks were also identified as critical D&O exposures, according to Willis Towers Watson’s 2018 Management Liability (Directors and Officers) U.S. Survey.
According to the report, the top D&O risks “in the coming year” include cyber incident/cyber claims (80%), claims by employees (55%), and regulatory and enforcement risks (48%). Meanwhile, concern over investor claims ranked seventh among the top concerns, a finding the report said was “surprising” given the rise in shareholder activism and trends in securities class action filings.
Respondents said D&O premium rates and any insurance program cost changes over the past year were primarily driven by company financial performance (39%) and industry risk profile (37%). Meanwhile, less than 30% of company respondents felt that cost changes were due to insurance market competition, “suggesting that market competition in pricing is less of a factor than it has been the last few years.”
In evaluating D&O insurance program priorities, a majority of companies (58%) ranked obtaining more favorable policy language as the most important change to their program this year. Looking ahead, coverage for investigations (including investigations of the organization itself) ranked as the most important primary coverage issue over the next three years. “Surprisingly, 77% of respondents consider entity investigation coverage important. Although, current purchasing habits do not appear to be aligned with that concern,” the report noted.
In reviewing claims experience over the past year, more than half of the respondents (55%) said their organization had “experienced” a lawsuit or demand by a current or former employee, but only 34% of those submitted claims for those experiences. Overall, the report found a significant portion of unreported claims across a range of experiences, including lawsuits by customers and cyber breaches, noting the “extent of unreported incidents is concerning and could jeopardize coverage due to late notice.”
“It is not surprising to see cyber risk ranked as the top concern,” commented Rob Yellen, executive vice president, D&O and Fiduciary Liability product leader, FINEX North America, Willis Towers Watson. “With today’s dynamic threats including unprecedented regulatory complexity, like the new GDPR and the California Data Privacy Protection Act, combined with the potential for a bet-the-company crisis resulting in severe financial and reputational harm, cybersecurity has been elevated to a top risk management issue facing directors and officers today.”
“The survey confirmed that D&O insurance remains an important tool for protecting organizations and their leaders,” said Andy Doherty, executive vice president and thought & product leader for FINEX North America, Willis Towers Watson. “Additionally, while containing D&O insurance program costs has always been a high priority, our results reflect that enhancing coverage remains a top priority, too.”
About the Study
The Willis Towers Watson 2018 Management Liability (Directors and Officers) U.S. Survey aims to better understand the perceptions of D&O risk and assess the value of D&O and other management liability insurance. The survey was conducted January through April 2018 and includes responses from 77 executives from various publicly traded and privately held companies, representing a range of industries.
About Willis Towers Watson
Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has over 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
SOURCE: Willis Towers WatsonTags: cyber security, Directors and Officers, survey, Willis Towers Watson (WTW)