The directors' and officers' (D&O) liability insurance market is heading into unchartered territory as we head into 2020, with reducing capacity, tightening wordings, rising premiums and increasing risks facing D&Os.

D&Os are facing a whole host of event driven risks including cyber, health & safety, geopolitical, climate change and environmental, bribery and societal risks. These risks are harder to monitor and manage, and also to underwrite and price. This new risk environment comes at a time when D&O insurers are facing significant losses due to years of low prices driven by competitive market conditions combined with a growing number of complex, long tail and costly claims. As a result the market is hardening and contracting, and a number of insurers are withdrawing from this line of business.

For D&Os it is a perfect storm as we head into the next decade, as they face a multitude of new risks at a time when D&O cover will be more expensive, more restrictive and harder to get. This situation will need careful handling by brokers, insurers and claims adjusters as clients' expectations will need managing as the level of cover and its costs will be different from what insureds have come to expect over the past decade – where reduced premiums and extended cover at renewal have been the norm.

In this new environment we can expect to see more contractual disputes and increased tensions between all parties in the insurance chain. D&O insurance teams should be planning for this new landscape, training staff to handle these unprecedented times and working closely with their legal advisers to ensure that they are ready for some tricky conversations and issues ahead.

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