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By Matthew Quinn
Pricing for directors’ and officers' liability insurance decreased 2.7 percent in the third quarter of 2009 compared to the third quarter of 2008, according to a report released on Friday by Aon.
After showing double-digit hikes in each of the previous four quarters, D&O pricing for the Standard & Poor's financial institutions sector, which includes banks, diversified financials, insurance and real estate, increased by only 3.2 percent in the third quarter. Aon found that D&O pricing for all remaining S&P industry sectors was down an average of 4.9 percent in the third quarter.
In the third quarter of 2009, the average price for $1 million in coverage limits decreased 14.1 percent from the second quarter of 2009, Aon said.
The major reason for the decline is the surging stock market since March.
D&O claims and pricing tend to move in the opposite direction of the stock markets, Aon explained. "When a company's stock is doing well, shareholders are typically content," the report said.
In the first three quarters of 2009, there were 130 federal securities class action lawsuits filed, with 49 related to the credit crisis. That's a 20 percent decrease from the 163 filings seen during the same period in 2008.
"The decreasing number of claims may signal an end to the litigation explosion for financial services firms," said Mike Rice, national practice leader of Aon's financial services group.
Aon expects D&O insurance pricing to continue to decline for financial institutions as well as most of the other industry sectors in 2010.
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