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Why are Directors and Officers insurance rates on the rise?

There have been many changes to the D&O insurance market as of late, including an increase in pricing and a tightening of coverage overall.

Of the various factors affecting this market shift, one of the most impactful are the changes that have been occurring in Australia’s legal landscape: the amount of class action lawsuits has drastically affected litigation against D’s & O’s and the resulting insurance claims.

While class action lawsuits entered the Australian legal system 25 years ago, the number of occurrences has increased greatly over the past 6 years. In the 2016 FY alone there were 35 new class actions, while the prior year experienced a record amount of 40 class actions. The resulting settlements have increased significantly, with a settlement of $250 million being the largest of this financial year. In addition to this, recent statistics show that many lawsuits have been drawn out longer than before causing an increase in defence costs and higher expectations for claims payouts.

For a better understanding of the development of class action lawsuits in Australia, see the article below.

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