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Financial Lines: A UK & European Perspective

While the difficulties of the U.S. commercial D&O market have been making headlines regularly, the financial lines market in the UK and Europe has been quietly facing its own constraints.

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Editor: What changes are you seeing in the Commercial D&O market in the UK and Europe, and what’s driving them?  

Vanessa Maxwell: The UK and European D&O market has been tightening for around two years. Class actions against foreign filers have been rising since the global financial crisis of 2007-2008, and increased a full 41 percent between 2014 and 2018. The decade since the global financial crisis has seen settlements against foreign companies increase dramatically, often with Europe leading the pack in total dollars and highest average settlement amounts.

In addition to the increase in class actions, since the crisis, regulators in the UK and Europe have been more aggressive in their enforcement, and many markets in London and Europe did not react quickly to the resulting loss trends, which ultimately necessitated dramatic corrective actions and pullback of capacity from some markets.

While a few years ago it was not unusual to see several carriers participating in large layers on complex D&O risks, the size of these layers have been greatly reduced. For example, at peak capacity, London could offer well over $750 million in capacity. Today, that number is more likely around $250 million to $300 million, and this only for a risk with strong fundamentals.

Generally speaking, European companies can expect current market trends to continue through 2021.

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Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, accident and health, medical stop loss, and homeowners insurance. The actual and final terms of coverage for all product lines may vary. It underwrites on the paper of Berkshire Hathaway's National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor's.

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