What is challenging the D&O insurance market today?

D&O is a sector shaped today by the basic economics of supply and demand – that’s according to Jimmy Heaton (pictured), head of D&O, UK & Europe, at the specialty reinsurance MGA Rokstone. The hard market has eased off and supply has quickly increased, he said, but the demand has stayed muted, especially around UK IPOs, so it’s still hugely competitive. 

The sector is also seeing fewer people movements, which is definitely impacting the market, he said, so it’s to be hoped that things should start to settle down. 

“As rates flatten in the US, we should expect that to filter to the UK, with time,” he said. “US primary layers are starting to flatten out and that’s an early but positive sign of change. There are reports of certain insurers making the most of hard markets in other lines to shore up casualty reserves in anticipation of a flaring up of prior year losses. We should see a flat, or at least stabilised, market in the UK next year.” 

What’s challenging the D&O ecosystem today?

Heaton highlighted that there are two main factors challenging today’s D&O ecosystem – rate and talent. The hard market quickly increased the demand for D&O underwriter and broker recruitment, he said, which in some cases led to compromises on experience levels. It’s with this in mind that Rokstone launched its D&O Academy.

The first cohort has just graduated, and the reinsurance MGA is about to embark on the second intake.  It’s massively rewarding, he said, and so encouraging to see the results slowly making their way into the quality of the submissions the firm is getting from brokers – it serves as an affirmation that expertise, longevity and security will win out.

Alongside these challenges, Heaton is seeing a number of opportunities for the D&O insurance market, which he said is always true regardless of market cycles because it’s an ever changing and evolving landscape.

“New or changing legislation, around ESG reporting for example, or other developments like new technologies, all give rise to new cover innovation opportunities,” he said. “The cover protects individual directors and officers who may have different drivers for buying the cover, so there are opportunities to innovate on placement layering for example. 

“The key thing is to maintain client interaction – don’t just treat D&O like a piece of paper to be filed away, but something more organic and iterative.”

Where are there opportunities in today’s market?

For Rokstone itself, he said, broadly speaking, the main opportunity lies in complex SME and mid-market D&O risks that fall between simple SME/automated products and large/coinsurance placements. He noted that it’s an area of frustration among placing brokers, as these risks essentially fall through the gap between online systems and London Market corporate/subscription placements.

“It is challenging areas of niche specialty lines like these that are Rokstone’s sweet spot, it is what we excel at,” he said. “We will give brokers a reliable and consistent underwriting partner and be their “go to” contact for these tricky D&O risks.”

What do D&O insurance brokers want from their partners?

As to what D&O brokers are looking for from their market relationships today, Heaton underscored the importance of being a stable and reliable partner. Brokers want a single point of contact with technical expertise, he said, not a different person to deal with every time they call and they are looking for a true tripartite relationship with strong long term insurance partners. 

“Ten years ago, there was a rush to automation in the industry,” he said. “Tech does have its place, but when that led to online trading platforms that weren’t staffed by experienced underwriters, the promises of the tech fell short.  Instead of improving the broker experience and speeding up the process it simply led to broker and client frustration when clients didn’t fit a box.”

How did Heaton get into D&O?

Looking back on his route into the directors’ and officers’ insurance sector, Heaton noted that he didn’t find the market as much as it found him. Having started his insurance career at AXA, he said, he was covering multiple lines, of which D&O was one.

“Financial services really resonated with me and D&O became my specialism right from the start,” he said. “AXA was a great grounding for four years. Then I moved to WRB and then on to Nexus where I was head of underwriting for D&O and FI and then later managing director of D&O. 

“I joined Rokstone last year, attracted by its culture and growing reputation – it struck me as an exciting, entrepreneurial MGA that had a clear vision for the future and I wanted to contribute and be a part of that journey. I’ve always strived to find a better way, to do things better and never ‘settle’ for the status quo and that’s what Rokstone is all about, so it was a good fit.”

What Heaton enjoys about the D&O insurance market

Exploring what he enjoys most about the D&O insurance sector, he pointed to its fast-paced and dynamic nature. The daily news agenda at a macro level impacts D&O almost in real time, he said, and as soon as new situations flare up – whether in politics or business anywhere in the world – the D&O world is on high alert as it’s often quite likely to impact clients.

“Also, D&O remains a bastion of broker relationships,” he said. “As a product it is more subjective to individual needs and so the broker has a greater opportunity to influence terms. You develop strong broker relationships and it is rewarding to work with those brokers long term and see them grow their client base.”