WTW-2020Q2资产管理市场季报（英文）-2020.8-8页_763kb

Asset Management Market Update D&O/E&O Insurance - Q2 2020 Summary

Core Content

This document provides an update on the D&O/E&O insurance market for Asset Managers and their sponsored funds in Q2 2020. It outlines the current state of the insurance market, emerging issues, and key trends affecting the industry.

Main Market Trends

Premiums and Retentions

• Primary Premiums: Generally increasing by 10–15% for most asset managers.
• Excess Premiums: Some insurers are seeking higher increases than primary layers if current pricing is considered inadequate.
• Per Claim Retentions: Typically remain flat, with a minimum of $250K now standard for middle market risks.
• Exceptions: Significant changes in risk profile (e.g., AUM, M&A activity, claim experience) may lead to more severe adjustments in renewal terms.

Market Dynamics

• Uniform Approach: Most markets are holding firm on rate increases, with few willing to undercut competitors.
• Walking Away: Some insurers are exiting underpriced programs, potentially complicating the renewal process.
• Relationship Considerations: Breaking relationships with long-term partners may be necessary to mitigate premium increases.

Targeted Segments

• Appetite: Asset management, especially registered investment advisers and funds, is a growing area for insurers.
• Limited Interest: Private Equity, BDCs, REITs, and managers with high exposure to CLOs, Real Estate, and other stressed investments are less favored.

Capacity

• Stable Capacity: Significant capacity is keeping D&O/E&O insurance rates more competitive than other financial sub-industries.
• Limit Deployment: Many insurers now offer a maximum of $10M per program.

Coverage

• Stable to Narrowing Coverage: Coverage remains broad, but some insurers are narrowing it, particularly in the following areas:
  • Cyber Corrections: Limited to trade errors only.
  • Silent Cyber: Added language to clarify coverage for cyber-related claims.
  • Derivative Demand Investigation Costs: Reduced or eliminated sub-limits.
• Blended Programs: D&O/E&O programs combined with EPL and Fiduciary lines face more invasive underwriting and potential narrowing of coverage.

Key Issues to Watch

Coronavirus/COVID-19: Market Volatility

• Observation: The pandemic has caused intense global market volatility.
• Concern: Increased claims activity is expected, including trade errors, investor complaints, and regulatory actions.
• Considerations: Asset managers should be prepared to provide updates on the impact of market volatility and ensure prompt notification of trade errors to internal contacts.

Coronavirus/COVID-19: Return to the Workplace

• Observation: As quarantine restrictions ease, questions arise about the "new normal" in workplace return.
• Concern: Increased EPL claims may occur due to issues like retaliation and discrimination.
• Considerations: Asset managers should understand the scope of EPL coverage, including its interaction with other insurance lines like Workers' Compensation and General Liability.

Fiduciary Standards

• Observation: The DOL proposed a new exemption for investment advice fiduciaries from prohibited transaction restrictions.
• Concern: The SEC's fiduciary standard and state-level rules may lead to regulatory conflicts and increased litigation risk.
• Considerations: Insurers may inquire about compliance with existing and proposed rules. Review of regulatory coverage is recommended as standards evolve.

Cybersecurity

• Observation: Cybersecurity is a major risk focus, especially due to the rise in remote work post-pandemic.
• Concern: Increased phishing risks and the potential for regulatory scrutiny due to cybersecurity lapses.
• Considerations: Insurers will ask about cybersecurity risk management frameworks and remote work policies. Review of Crime and Cyber programs and exploring standalone or extended coverage is advised.

Environmental, Social & Governance (ESG)

• Observation: Inconsistent ESG data is causing uncertainty among investors and issuers, prompting regulatory action.
• Concern: Potential for "greenwashing" claims due to lack of uniform reporting standards.
• Considerations: Insurers may ask about ESG compliance processes and disclosure review procedures. A review of D&O/E&O coverage related to ESG is recommended.

Private Fund Adviser Deficiencies

• Observation: The SEC identified deficiencies in private fund adviser disclosures and information handling.
• Concern: Enforcement actions may trigger coverage under D&O/E&O insurance.
• Considerations: Review of OCIE examination involvement and outcomes is important. Time-sensitive reporting and coverage for investigations should be assessed.

Disgorgement

• Observation: The Supreme Court ruled that SEC disgorgement awards are "equitable relief" under federal law.
• Concern: Increased exposure for asset managers and their directors and officers due to potential civil enforcement actions.
• Considerations: Review of coverage for government investigations and understand policy limitations and exclusions.

Outsourcing Risks

• Observation: Outsourcing is common in the asset management industry, especially in the Registered Investment Company sector.
• Concern: Risks associated with third-party services and data transfer may increase due to systemic failure potential.
• Considerations: Conduct thorough due diligence on service providers, understand their insurance and indemnification obligations, and assess how third-party actions may affect coverage.

Conclusion

The D&O/E&O insurance market for asset managers is experiencing challenges with rising premiums and evolving coverage terms. Asset managers must remain vigilant regarding cybersecurity, ESG compliance, regulatory scrutiny, and the implications of the pandemic. Proactive review and understanding of insurance policies are essential to manage these risks effectively. For further information, contact Timothy M. Sullivan or your Willis Towers Watson representative.

About Willis Towers Watson

Willis Towers Watson is a leading global advisory, brokering, and solutions company that helps clients turn risk into a path for growth. With a history dating back to 1828, it has 45,000 employees operating in over 140 countries. The company offers insurance-related services through appropriately licensed entities in each jurisdiction. The information provided is not intended to constitute legal or other professional advice and should not be relied upon without consultation with legal and other professional advisors.