Additional £10m capacity is welcome boost to brokers as liability costs triple
Beazley will offer around £10m in extra capacity for UK directors' and officers' (D&O) and errors & omissions (E&O) business next year.
The additional capacity will represent a major boost to D&O brokers as the cost of D&O cover has tripled in the past three years.
Beazley confirmed this week that it was aiming to increase the overall capacity of its Lloyd's syndicates 623 and 2623 to £736m in 2004. The 2003 capacity of the two syndicates totals £660m.
Beazley said the extra £76m in capacity would be directed towards D&O and E&O business in the UK, US, Europe and overseas.
"About 15% of the pre-emption will go towards UK E&O and D&O," said chief executive Andrew Beazley.
A recent survey of 55 of Aon's corporate customers showed that the average premium paid per £1m of D&O cover provided increased trebled in the last three years. The average rose from £3,025 in 2000 to £10,470 by the end of 2002.
The healthcare and pharmaceuticals sectors suffered the steepest hikes, with premiums surging eight-fold since 2000. Average premiums for D&O cover in the sector rose from £3,800 in 2000 to £30,000 at the end of 2002.
A survey conducted by Marsh earlier this year concluded that D&O rates had soared by up to 1,000% in some instances.
Meanwhile research carried out by Zurich revealed that around 45% of small businesses have no D&O cover in place.
Earlier this year, a leading law firm called for the establishment of captives to alleviate the crisis in the D&O market.
Herbert Smith cited the example of the recent Wickes trial, where members of the board had to resort to legal aid because of insufficient D&O cover, as evidence of the need to set up captives.
Meanwhile, a study published by law firm Cameron McKenna concluded that 45% of 200 directors surveyed were not familiar with their D&O cover.