From: Captive Insurance Times

The past few years have seen eye-watering rates for companies seeking D&O liability insurance. Barney Dixon looks at the solutions that emerged to solve this issue and whether or not captives are a suitable alternative to traditional Side A coverage as rates return to normal

Last year, Delaware governor John Carney signed into law a bill that facilitates the use of captive insurance for Side A directors’ and officers’ (D&O) liability insurance. The bill amended the Delaware General Corporation Law (DGCL) to allow corporations to purchase D&O insurance through captive insurance companies to cover both indemnifiable and non-indemnifiable loss.

Initial expectations were that the legislation would have a “positive impact by providing flexibility and an alternative to traditional D&O insurance, either due to pricing considerations or limited insurance capacity,” according to J. Andrew Moss, partner at law firm Reed Smith.

Steep turns in D&O

Historically, companies would purchase traditional Side A D&O insurance to cover non-indemnifiable exposures. But, while D&O rates have been low for much of the 2000s, the past four years have seen a significant spike in prices.

Lorraine Stack, international consulting leader and head of operations at Marsh Captive Solutions, Ireland, says that up until 2019, Marsh had “less than 40 captives writing some element of D&O, almost exclusively Sides B and C.”