The QCA’s latest sentiment survey has shown increasing costs and falling cover for directors and officers of smaller quoted companies.
On average the community saw premiums increase to more than double from £22,000 to £48,000 over the last year. Simultaneously, there was a fall in cover for directors which saw an average reduction by over £1m from £9.4m down to £8.3m.
Feeding into these averages are also some very stark examples with one respondent reporting that “rates had gone up [by] 4 times” and another citing a 60% increase in their premium.
“Premiums have soared due to anticipated risk of company failures when the pandemic safety net ends. We tested 8 companies and 6 would not quote.”
QCA Q2 Sentiment Survey respondent
Directors are concerned that this trend is set to worsen and government policy will exacerbate the issues that have caused tightening in the D&O insurance market. Most significantly, the ongoing BEIS consultation on audit and corporate governance is set to vastly increase Directors’ liability making it significantly more difficult to get good insurance at a good price.
“What is happening in D&O [insurance] is a reflection of the uncertainty in the market arising from a stifling regulatory environment, excessive corporate governance requirements, audit failures etc. All in all very disheartening.”
QCA Q2 Sentiment Survey respondent
The data from QCA members is supported by Willis’ comprehensive D&O Global Survey. A majority (64%) have seen their insurance premiums rise and when asked if they thought the market for Directors & Officers liability was “hardening” an overwhelming 71% agreed to a moderate or great extent.
One of the key issues with emerging regulation is the potential impact on insurance and the knock on effect this will have on board quality and diversity;
Tim Ward, Chief Executive of the Quoted Companies Alliance said:
“The impact of the key reforms proposed in BEIS’ consultation on audit and corporate governance reforms is going to have a further negative impact on directors as they will be less able to get the D&O cover necessary to work with confidence. In addition, some of the proposals will increase personal liability which cannot be covered by D&O insurance. There is the real danger that increasing director liability at a time when the market for insurance is already tightening could drive directors away from taking positions on public company boards. As proposed the reforms will backfire. The result will be weaker governance of the UK’s public companies as the supply, quality and diversity of effective board members decreases.”
To view the full survey please visit : Quoted Companies Alliance Small & Mid-cap Sentiment Index (theqca.com)
