Alta Signa’s Technical Expert Spotlight Series focuses on Wolfgang Polzer, European Head of Technical Underwriting – Commercial D&O, who shares his insights on emerging trends across Europe’s Directors and Officers (D&O) market.
The commercial D&O market in Central Europe is navigating a period of significant change and complexity. Key sectors such as construction, automotive, and commercial real estate - in addition to supply chain reliant industries - continue to demand our attention. Maintaining a balanced portfolio with underwriting discipline at its core amidst these evolving conditions is crucial.
Evolution of the Risk Landscape
The current risk landscape is influenced by several macroeconomic pressures. Most European countries are experiencing low to no GDP growth, with inflation varying across regions. Geopolitical tensions, particularly our reliance on Russian gas amid ongoing conflicts, add another layer of complexity. Additionally, the shift towards a less carbon-intensive economy, regulatory changes and focus on ESG, as well as rising cyber risks further complicate the risk environment.
Capacity and Risk Appetite
After the hard market for D&O in Europe wound down last year, we’ve seen a surge of new entrants bringing additional capacity into commercial D&O. This influx didn’t happen overnight but started gradually with a few players and has now become more pronounced. This fresh capacity exerts downward pressure on premiums, and to my mind runs the risk of creating a disconnect between underwriting standards and the actual risk environment.
In fact, the commercial real estate sector stands out as one of the few sectors where underwriters across the market are exercising more diligence and caution in general terms, but broadly speaking for the rest of the commercial D&O sector in Europe this is not the case.
Despite the market pressures, there hasn’t been a revolutionary change in policy wordings. Instead, wordings are changing slowly, with longer Extended Reporting Periods (ERP) coming into play, for instance.
We’ve also noticed a slight uptick in notifications on excess policies, particularly for companies exposed to securities class actions, influenced by trends from the US. Continental European regulators are also in the early stages of developing mechanisms for investors to file class-action-style lawsuits, in line with evolving EU laws. Additionally, there’s a growing focus on the personal liability of directors related to ESG and greenwashing issues.
Alta Signa’s Differentiators
With the evolving risk landscape, and downward pressure on premiums, to my mind the commercial D&O insurance market needs to work to maintain underwriting and pricing discipline to avoid dramatic swings in pricing to maintain credibility among policyholders.
For buyers of commercial D&O insurance, predictability for budgets is crucial, yet the price they pay at renewal can change significantly year on year, either upwards or downwards. I emphasise the need for a bespoke approach to each risk, explaining to policyholders the value and pricing rationale. However, fresh capacity prompting a potential race to the bottom on pricing complicates this strategy. This trend risks eroding underwriting discipline and credibility among buyers of D&O insurance, who plan their budgets far in advance of renewal.
Responsiveness and Human Touch
I firmly believe Alta Signa stands out through its client-centric approach. Our local presence and deep market knowledge enable us to navigate complex risks effectively. We pride ourselves on our responsiveness. “Pick up the phone, be contactable, be reachable, be available, and provide feedback promptly,” is a principle I hold dear.
This diligent approach to underwriting and risk assessment is critical in our specialty market. We’re committed to training and developing knowledgeable underwriters who can accurately assess and price non-plain vanilla risks. This proactive approach, combined with our broad panel of independent capacity providers, ensures that we match risk appetite prudently and remain agile.
Looking ahead, the market is expected to continue softening, barring any sudden significant changes. At Alta Signa, we remain confident in our growth, driven by our unique approach and our territorial expansion.
Call to Action
My message is clear: each risk must be analysed in detail to determine appropriate pricing. Indiscriminate premium adjustments across portfolios undermine market credibility and fail to address the specific risk drivers.
Alta Signa’s commitment to bespoke risk assessment and client engagement sets us apart in this challenging market. By maintaining underwriting discipline and leveraging local market expertise, we aim to navigate these uncertainties effectively and continue our sustainable growth while providing the highest quality service and underwriting available in the commercial D&O market.