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Each quarter, Aon's Financial Services Group publishes a pricing index of Directors' and Officers' liability insurance that tracks premium changes relative to the base year of 2001.

In the third quarter of 2009, we saw the average price for $1 million in coverage limits decrease 14.06 percent from the second quarter of 2009, with the index moving from 1.28 to 1.10.

A more significant result is that pricing decreased 2.65 percent in Q3 2009 as compared with Q3 2008. Since D&O policies are typically written for a 12-month period, this year-over-year comparison is a close approximation of renewal pricing and a more meaningful indicator of renewal results in the quarter.

We generally associate claims frequency with price fluctuations. After an uptick in frequency beginning around the middle of 2007, we have seen renewal price increases in two of the last four quarters (and only modest decreases in pricing in the other two) after 20 consecutive quarters of price decreases.

Looking at only those programs that renewed in both Q3 2009 and Q3 2008 would provide an even more realistic comparison. On that basis, pricing decreased 2.63 percent. This may not be a significant difference due to the overall sample size, but does smooth out some of the volatility seen at the S&P sector and industry group level due to differences in the composition of the samples from one year to the next.

	Aon Quarterly D&O Pricing Index - Third Quarter 2009 (175 KB)