Lloyd’s chief outlines rising D&O risk
Lloyd’s CEO Richard Ward sees exposure to claims against directors and officers as one of the biggest risks to insurers coming out of the global financial crisis.
In an address to the Australian Institute of Company Directors (AICD) in Melbourne last week, he said insurers have already had to take some big writedowns because of their D&O exposure.
Insurers must diversify their risk and have realistic disaster scenarios so that the risk on the insurer’s books does not threaten the company’s survival, Mr Ward told insuranceNEWS.com.au.
“We’re not saying D&O cover is bad,” he said. “We want to write D&O cover and we’ll write it for financial institutions and other big institutions, but we don’t want our whole world to be in D&O.”
Mr Ward also says a combination of the economic recession, poor investment income, problems with AIG and climate change means rates will have to go up this year.
“People are talking about single-digit rate increases but that’s in today’s climate,” he said. “I don’t know what’s going to happen in the third quarter,” he said.
He also believes regulators will start to put a lot more pressure on ratings agencies.
“There are definitely question marks around the ratings agencies,” he said. “You pay them to rate you. But no one has come up with a better structure.”
Also see ANALYSIS
In an address to the Australian Institute of Company Directors (AICD) in Melbourne last week, he said insurers have already had to take some big writedowns because of their D&O exposure.
Insurers must diversify their risk and have realistic disaster scenarios so that the risk on the insurer’s books does not threaten the company’s survival, Mr Ward told insuranceNEWS.com.au.
“We’re not saying D&O cover is bad,” he said. “We want to write D&O cover and we’ll write it for financial institutions and other big institutions, but we don’t want our whole world to be in D&O.”
Mr Ward also says a combination of the economic recession, poor investment income, problems with AIG and climate change means rates will have to go up this year.
“People are talking about single-digit rate increases but that’s in today’s climate,” he said. “I don’t know what’s going to happen in the third quarter,” he said.
He also believes regulators will start to put a lot more pressure on ratings agencies.
“There are definitely question marks around the ratings agencies,” he said. “You pay them to rate you. But no one has come up with a better structure.”
Also see ANALYSIS