Aon Australia CEO commends moves to ‘untangle’ country’s struggling D&O market

Broker Aon has waded into the debate in Australia around how to shore up the country’s struggling directors’ & officers’ (D&O) liability market – widely regarded as the most difficult market in the world to underwrite D&O insurance.

The D&O market for Australian insureds has been subject to ongoing profitability pressure, which has substantially tempered insurer appetite for participation on listed companies’ D&O programmes, reducing the overall size of the market and driving sharp increases in premiums and deductibles.

The Australian government recently announced a temporary amendment to the continuous disclosure regime for six months so that companies and their officers will only be liable for continuous disclosure breaches if there is ‘knowledge, recklessness or negligence’ with respect to updates on price sensitive information.

Now, Aon has welcomed these announcements in relation to continuous disclosure and regulation of litigation funders describing them as positive moves for the struggling D&O market.

This, paired with the recent announcement that litigation funders be regulated under the Corporations Act, provides tangible evidence that the government is seeking to address the adverse impact on business of Australia’s challenging securities class action environment, Aon has noted.

The active securities class action environment (and resultant settlements) has resulted in Australiabeing viewed as the most difficult market in the world to underwrite D&O insurance.

“We are heartened to see the government’s favourable response to the business community’s lobbying for better control of securities class action activity through this series of announcements. This has to be seen as a positive development for the increasingly challenged D&O market,” said Eden Fletcher, director, financial services group at Aon.

“In the short-term, it provides assurances to insurers around the potential for a spike in claims related to COVID-19. More importantly, in the mid to long term, it opens the door for further discussions about future law reform to Australia’s continuous disclosure regime. For our part, we intend to advocate for our clients to help insurers better understand the impact of these developments to drive a more sustainable market for both our clients and insurers.”

James Baum, CEO of Aon Australia, added: “The government should be congratulated for addressing and making moves toward untangling some of the issues currently facing insurers and clients alike in the D&Omarket. While there may be some limitations as to the practical import ofthe changes to the continuous disclosure regime, these announcements are a positive development that will help both to relieve some of the pressure on companies amid COVID, and to open up some capacity and optimism in the insurance market.”