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Is It Ever Too Early to Start Renewing D&O Insurance?

In the current hard insurance market, which is also rapidly evolving as risks change, buyers of directors and officers (D&O) insurance may want to take control of their risk by getting an early start on renewals.

While some hang-ups may prevent early starts, such as underwriters wanting to wait for the most up-to-date financial statement, there are few downsides to getting a jump on the process. That early start can give the buyer more control over the market and address bumps in the road that might arise, such as capacity surprises.

An early start can involve two phases. The first is consideration of the specifics of the renewal, the possibility of capacity constraints, the potential need for replacing specific insurers on the program or whether the organization may need to increase its limits.

The other is checking in with incumbent insurers early, perhaps at the midyear mark, to strengthen relationships, gauge their ongoing interest in the buyer’s program and educate them on any changes to the organization’s risk profile or business strategy since the last renewal.

In each case, it’s wise to partner with your broker on an early kickoff for renewal. Ultimately, an early start sets the stage for a coordinated and thoughtful approach to the D&O renewal process.


The Hard Market’s Impact

Current market conditions are prompting more communication with insurers, with an increased emphasis on telling the company’s story in the insurance market, particularly if it’s necessary to replace or attempt to add capacity.

Early meetings with incumbent markets can be an important part of that communications process, strengthening the relationship between buyer and insurer and helping the buyer recognize changes in the market that will shape the ultimate renewal strategy. Approximately six months before renewals might be a good time to introduce the business to other insurers not yet on the D&O program.

In the current market, staying with the incumbent insurer might be advantageous, although new capacity is making its way into the market. But early conversations will reveal the incumbent’s plan and whether the buyer can rely on that capacity. If not, the knowledge of a need to find new capacity will help the buyer craft a renewal strategy. An early start to the renewal process can also give the buyer’s broker the maximum opportunity to explore all possible market options for securing coverage.

Risk managers should also communicate early with their organization’s leadership about market conditions. Those conversations can set leaders’ expectations for renewal, allow the risk manager to explain objectives and the implications of program changes, and provide an opportunity to explore possible solutions.

The hard market might force buyers to rethink their D&O program’s structure by employing alternative risk financing arrangements, such as using a captive insurance company to take on Sides B and C risks while turning to traditional markets for Side A coverage. Such a move involves planning and takes time, so an early start is essential in crafting and executing that strategy.

What’s more, the D&O market in the U.S. and Canada is likely to remain challenging for some time, so organizations might want to radically change their approaches to D&O coverage. To do that, organizations may need as much as a full year of lead time to develop a new strategy.

As the current market continues to mature, new markets and underwriters are appearing. Buyers might want to consider taking early meetings with them. Those meetings can provide a chance to understand the new insurers’ underwriting strategies and how they might fit with the insureds’ needs, and for the buyer to tell its story in preparation for the potential of the carrier playing a significant role in the renewal.

As they talk to underwriters, buyers should be prepared to address some of the key risk themes insurers are considering, such as environmental, social and governance initiatives, which includes diversity and inclusion matters.

Insurers will also want to know about any significant events that have affected the company over the past 12 months, including changes to the company’s balance sheet, market capitalization, board members, top executives or strategy.


The Pandemic’s Impact on Renewals and Preparation

On a positive note, the pandemic has introduced some efficiencies in the D&O renewal process. While face-to-face meetings are valuable, the virtual meetings forced by the pandemic have made it easier to meet with additional decision makers at multiple insurance companies. Eliminating the time commitment associated with traveling to underwriting meetings has provided an advantage in the form of greater access to underwriters and senior decision makers.

The virtual environment has also made it easier to connect the buyer’s senior leadership with underwriters to tell the buyer’s story more effectively, which can be an advantage at renewals.

Preparation for those underwriting meetings is critical.  In the current market, it can take time to craft presentations and coordinate who will present. Because buyers will likely have only one underwriting meeting with each insurer, the presentation has to be its best. Adequate preparation will allow the buyer to present the organization to underwriters in a favorable light, differentiating the company’s risk from others competing for limited D&O capacity.[1]


The benefits of starting early on D&O renewals far outweigh any potential downsides. An early start can allow a buyer to approach the renewal in a thoughtful manner, crafting a best-in-class renewal strategy to maximize the chances for a successful renewal.

[1] Recommendations for a Successful D&O Underwriter Meeting