The directors’ and officers’ market is continuing to deteriorate for Australian-listed companies as premiums keep rising and insurers moving to improve profitability become more selective.

Companies in the ASX200 experienced a median 122% increase in primary premiums in the second half of last year following an 89% gain in the first six months, an Aon first quarter market insights report says.

Looking ahead, the report says pressure on premiums will continue for listed firms, and companies with smaller market capitalisations may see relatively larger increases.

Underwriters are committed to strategies to deliver a substantial upward re-alignment of the D&O premium pool as class action costs have increased.

“Insurers are taking this action in the face of ongoing profitability challenges emanating from Australia’s active securities class action environment and other significant claims activity,” Aon says.

At least 15 securities class actions, including competing claims, have been filed against listed companies since January last year and a further five or more are being investigated, according to the report.

The evolving environment and the lack of predictability of many class actions is also hindering efforts to accurately model premium requirements.

“This is demonstrated by the volatility in premiums offered between insurers and is especially evident in layers of insurance purchased between the primary layer and a limit of liability of $70 million,” Aon says.

The report warns that most insureds should anticipate a minimum deductible of $1-10 million for any securities entity claim.

D&O capacity in the Australian and London markets remains generally available, but for listed firms insurers are increasingly selective and thorough in underwriting reviews.

Non-listed organisations are also experiencing some modest upward pressure on premiums based on their risk profiles and business sectors.

Those operating in the retail, construction, energy and health sectors are becoming more subject to particularly rigorous review by insurers.

Climate change is also a risk area receiving increasing focus from both regulators and advocacy groups, Aon says.