EMEA financial institutions report coverage terms changes in directors and officer liability: Aon

Premium rate changes in crime and fidelity insurance, for financial institutions in Europe, the Middle East and Africa, have taken a “sharp turn upward” while 29% of respondents reported improved coverage terms in directors’ and officers’ liability policies, Aon plc recently reported.

London-based Aon Risk Solutions announced Wednesday the release of its 2014 EMEA Financial Institutions Industry Report. That report is based on research and data from Aon’s Global Risk Insight Platform and other surveys, including Aon’s Global Risk Management Survey.

Respondents from EMEA financial institutions “revealed that they are more concerned than their global counterparts with risks including technology or system failure, cash flow and liquidity risk, crime, theft, fraud or dishonesty of employees and business interruption,” Aon stated in the report.

The report includes line graphs depicting average premium rate trends for D&O liability, professional indemnity and fidelity/crime coverage.

“Following four consecutive quarters of premium rate falls, the market for Fidelity and Crime coverage has taken a rather sharp turn upward, with first a 2% then 2.7% increase respectively in the second and third quarters of 2014,” Aon noted.

There were nine consecutive months of D&O liability rate increases, Aon added.

“However this trend has fallen back in 2014, with price of coverage falling in both Q1 and Q2, and remaining unchanged in Q3,” Aon said of D&O rates for EMEA financial institutions.

Respondents reported predictability in professional indemnity rates, according to the report.

“Between Q4 2013 and the first three months of this year, a negative 3.3% switched to a 1.7% rise then premium levels remained unchanged in Q2 and Q3.”

Aon also included trends in changes of coverage terms. The report includes a graph – depicting seven lines of coverage –  broken down by the percentage of respondents who reported either unchanged policy coverage conditions, significantly more restricted coverage conditions, somewhat more restricted coverage conditions or improved policy coverage conditions.

“The coverage lines that have experienced the most change include Directors and Officers Liability,” Aon stated, adding 24% of respondents said that their D&O coverage terms “had become ‘somewhat more restricted’ while 29% have witnessed improvements in terms and conditions.”

In employers’ liability and workers’ compensation, there was a broadening of coverage terms for 29% of respondents.

In general liability, 17% reported improved coverage terms while the other 83% said they were unchanged. In property, 5% reported somewhat more restricted terms, 21% reported improved terms and the rest reported they were unchanged.

In umbrella/excess liability, 8% reported improved terms and the remaining respondents said they were unchanged.

In auto, 14% reported somewhat more restricted terms, 29% said terms had improved and 71% said they were unchanged. In professional indemnity, 25% reported improved terms while 75% said they were unchanged.

“In today’s global environment, financial institutions face increasingly complex challenges ranging from regulatory scrutiny of risk and capital ratios, through to sustained economic pressure and rising litigation,” stated Enrico Nanni, chief commercial officer, financial and professional services at the Aon Global Broking Centre, in a press release. “In addition, the concern around potential technology failures and constant threats of data breaches from cyber-attacks means the stakes for financial institutions have never been higher.”