Financial Institution Directors Face Heightened Risk Perception, WTW Survey Finds

WTW's Global Directors' and Officers' Survey Report 2024 has revealed a significant 47% increase in risk perception among financial institution directors. This heightened sense of risk has led to potential overinsurance for management-related risks and underinsurance in other areas, largely due to a lack of data-driven guidance.

The survey findings come amidst various trends in the global insurance market, particularly related to directors' and officers' (D&O) liability insurance. In the first quarter of 2024, average commercial insurance rates fell in the UK, Asia, Canada, and the Pacific, while Marsh's global insurance rate index increased by a modest 1%, down from 2% in the previous quarter.

For US buyers, both D&O liability rates and retentions decreased in 2023, and commercial insurance rates rose an average of 3.9% in Q1 2024, a notable drop from the 5.6% increase in the preceding quarter. AXA XL also launched a new lead DIC D&O liability policy in Bermuda, further shaping the market environment.

Cyber risk has emerged as the most significant liability risk perceived by German managers, while softer rates for cyber insurance could quickly change in the event of a major incident. The EMEA insurance market remained flat overall in Q4 2023 and showed slight easing.

Why this matters: The WTW survey highlights the growing concerns among financial institution directors regarding liability risks. The potential for overinsurance and underinsurance due to a lack of data-driven guidance underscores the need for more informed decision-making in risk management strategies.

Looking ahead, global reinsurance prices are expected to peak at multi-decade highs in 2024. The US D&O market is experiencing growing competition, leading to increased capacity and lower pricing. As financial institution directors navigate this complex risk landscape, the importance of accurate data and expert guidance becomes increasingly evident.

Key Takeaways

• 47% increase in risk perception among financial institution directors
• Potential overinsurance for management risks, underinsurance in other areas
• Cyber risk emerged as top liability risk for German managers
• US D&O market sees growing competition, increased capacity, lower pricing
• Global reinsurance prices expected to peak at multi-decade highs in 2024