In Partnership with
Tackling new challenges in management liability
As the pandemic wanes, economic challenges are affecting businesses, putting board members and managers at risk of lawsuits. Three experts and leaders in the management liability space share their insights into this issue
Stephen Swartley
Arch Insurance
Industry experts
Mark Paccione
AXIS Insurance
Richard Bryant
Prime Insurance
Stephen has over twenty years of experience in management liability and product line expertise in directors’ and officers’ liability, employment practices liability, fiduciary liability, fidelity, kidnap & ransom, and cyber liability. Prior to joining Arch in June 2009, he served in a variety of underwriting and managerial positions in management liability at The Hartford and as an underwriter at Reliance National.
Arch Insurance
Stephen Swartley
Mark joined AXIS more than 10 years ago and has been in his current role since 2016. He previously spent more than 18 years with Chubb in various underwriting and leadership roles. He then spent two years at Everest launching the management liability insurance platform. Mark is actively involved with PLUS and formerly served on the board of directors for the Insurance Federation of New York (IFNY).
AXIS Insurance
Mark Paccione
Richard started his career at a Lloyds Syndicate in 1985. He is an experienced senior underwriter and business leader, with a deep knowledge of Lloyd’s and the North American, MGA, and professional liability markets. Most recently, he was named president of underwriting at Prime Insurance as of March 2022. He has been involved with Prime for close to 25 years, offering support by way of capacity in the early years and watching it grow to the company it is now. It was Prime’s expertise and iron will in dealing with claims that was Richard’s overwhelming rationale for joining.
Prime Insurance
Richard Bryant
“We’ve got challenges to face, we’ve got portfolios that we’re watching, we’re looking at our clients, and trying to look for stress cracks with regard to the financial distress of their companies”
Mark Paccione,
AXIS Insurance
AS THE PANDEMIC wanes, a risk-laden economic landscape marked by runaway inflation, supply-chain issues, and labor shortages is affecting not just businesses, but board members and managers, who face a surge in lawsuits. What are the knock-on effects for insurers?
Insurance Business America sat down with three leaders in the management liability space to talk about where the market stands, and what role insurers and brokers can play in keeping clients on track and mitigating extensive threats to businesses.
The COVID-19 pandemic set off a chain of economic and social crises that have led to an extremely volatile environment for insurers. Mark Paccione, head of commercial management solutions at AXIS Insurance, says runaway inflation, high capital costs, supply chain challenges, and staff shortages all make up part of a long list of clients’ worries.
“Underwriters must be aware of this trend [of social inflation] and bake that into their pricing and terms and conditions based on the given product line”
Stephen Swartley, Arch Insurance
“We can’t sit back and say, ‘Things are looking good, look at the last two years!’ We need to look at the last 10 to 20 years, and then also try to look into a crystal ball and say, ‘How are things going to develop over the next two, five, 10 years?’”
Richard Bryant
Prime insurance
“There are companies that have been helped through the economic storm by governments. Is that help being withdrawn and is that going to cause other issues?” he said to Insurance Business. “Nobody really knows what's going to happen, but it's not necessarily looking good.”
But this tumultuous landscape isn’t anything new to the insurance industry, Bryant noted. “If you look back to the 1980s, when we had similar situations, rising interest rates and galloping inflation – the industry had a major change,” he said. “Are we heading towards that? I think possibly.”
For Stephen Swartley, chief underwriting officer and senior vice president of executive assurance at Arch Insurance, the ripple economic effects of the pandemic are ripe for securities class actions (SCAs).
Swartley emphasized that underwriters must engage companies not just on their ESG stands, but also on how they’re communicating them. “I think that's an area that's ripe for litigation, if they don’t get that right,” he observed.
For Paccione, it’s part of a broadening and challenging landscape for carriers, with ultimate consequences for clients and brokers.
“I think social media plays a bit of a role in fanning of the flames. Different social topics that exist today become global issues almost immediately,” he said.
“Frankly, things like ESG are coming down the tracks, and we should be planning for how we underwrite to ESG topics. What do we think the claims are going to look like? What are the lack of disclosure claims going to look like?” Paccione asked.
One specific factor contributing to social inflation is court strategy by plaintiffs’ attorneys, who are adopting more aggressive methods to litigate cases. But Bryant said the insurance industry needs to take some of the blame.
“We've overpromised as an industry, and we've underdelivered, and we haven't handled the claims properly. And we've made unhappy customers,” he told Insurance Business.
“The industry is a bit like my Labrador [retriever]. You could feed it nonstop, it'll take in that premium, and you can keep giving it to it. But you got to deal with what comes out the back end eventually. And as an industry, we haven't been particularly good at that,” he said.
For Paccione, carriers need to develop rich risk-mitigation resources and stand next to their clients during the claims process. He noted the complexities of SCAs would continue in the near-to-long term because of social inflation.
Amid such emerging risks and a volatile economic environment, stakeholders in management liability need to come to the table to have difficult but important conversations.
Bryant said the industry shouldn’t be lulled into a false sense of security about the recent drop in SCAs. He pointed out that there was less business activity, fewer mergers and acquisitions, and more government support for companies during the pandemic. “There have been fewer cases coming into the courts because they haven't been open. And now that everything has started to open, are we going to see more bankruptcies? Are we going to see more UPL? I would probably say yes,” said Bryant.
“We can't sit back and say, ‘Things are looking good, look at the last two years!’ We need to look at the last 10 to 20 years, and then also try to look into a crystal ball and say, ‘How are things going to develop over the next two, five, 10 years?’ It's a long-term play,” Bryant said.
“We've got challenges to face, we've got portfolios that we're watching, we're looking at our clients, and trying to look for stress cracks with regard to the financial distress of their companies, which would cause a certain number of claims,” Paccione said during the panel discussion.
Richard Bryant, president of underwriting at Prime Insurance, warned that the situation might get worse before it gets better, as economies try to get on steady footing post-lockdowns.
“Some SCAs are based on those patterns, like a company had an earnings miss based on a supply-chain issue and they get sued. We’re seeing activity there and we're going to see more of that,” he cautioned.
Another important topic now is the rise of environmental, social, and governance (ESG) investing. Companies face scrutiny from regulators and investors on their actions to mitigate climate change, and on social issues such as gender diversity, racial discrimination, and socioeconomic inequalities. This sensitivity influences the nature of SCAs.
Read on
Social inflation also forms a significant part of the market’s challenges. The term refers to increased insurance losses due to societal trends such as an uptick in legal advertising, litigation funding, and public distrust of corporate defendants. The phenomenon is said to be a leading driver of escalating costs in the commercial liability space, as insurance claims, jury awards, and settlements rocket.
“Underwriters must be aware of this trend and bake that into their pricing and terms and conditions based on the given product line,” Swartley said. In employment practices liability, for instance, cases involving sexual harassment have more than tripled in value since 2015, he added.
“But as importantly, claims teams need to be aware and have modeling or other tools to come up with what they think is an accurate valuation of a given case today and use that to inform what the best resolution might be for a given case.”
“It's sort of an obvious one, but [it’s about] just making sure all parties’ insurers, brokers, and clients are really communicating carefully so they understand each other's expectations on an account, a claim, or a given situation,” Swartley said. Beyond boardroom and client meetings, he stressed, brokers and insurers need to maintain a deep level of engagement, and ensure those partnerships are strong.
Bryant emphasized the importance of insurers delivering on their promises to build trust. “We need to ensure that we don't just cancel policyholders when they get a claim. And that's often what the industry does and gets tagged for,” he said.
“We need to portray the industry as a key component of the economy that, without it, the economy would collapse, as opposed to the perception – misguided and misplaced – of [us] being on the side of the bad guys. And we're not. We're the good guys,” Bryant stressed.
“As an industry I think we need to do a better job at managing the sort of overpromise and underdelivering,” Bryant said at the panel’s close.
“I think that it's incumbent upon all of us to understand what the large economic challenges coming our way are that face all our potential clients – our portfolios, insurance carriers, and brokers alike. It's going to be volatile. I believe there's going to be more frequency, and more variety of claims,” Paccione noted.
The challenges ahead will also serve as a reckoning for the industry, Paccione added. “Really, it is about some of the things that we've been talking about throughout this whole discussion, which is, are we understanding what our clients’ needs are? Are we bringing value to the table? How are we making sure that we are long-term partners when our clients need us most?”
Arch Insurance North America is part of a global insurer offering superior coverage and service. We participate in specialty lines where the talent and knowledge of our employees are a competitive differentiator. We serve North America from offices in the United States and Canada, providing superb coverage and claims handling through careful and diligent underwriting of risks and business-friendly solutions. With 20 years of operating history and strong financial ratings, our track record remains solid.
Find out more
AXIS Insurance is a leading provider of specialty insurance globally. Coverage is backed by the financial strength and solid claims-paying ability of the AXIS Insurance companies.
In an uncertain world, working with the experts at AXIS Insurance enables people and organizations to take necessary risks to realize their ambitions while providing them with peace of mind in knowing they are covered should the unexpected happen. We understand the challenges that clients face, and through our specialist insurance solutions and excellent service we help them to navigate the complexities and manage and mitigate their risks.
Find out more
Prime Insurance Company is an excess and surplus (E&S) lines insurance company, specializing in property and casualty insurance for specialty and unique risks. Prime writes E&S business in all 50 states and is rated A (Excellent) by A.M. Best. By managing underwriting, policy services, risk management, and claims handling in-house, we have a proven track record of providing insurance services in a cost-effective, focused manner with both the producer and the insured in mind. Prime currently produces in excess of $400 million gross premiums annually and has offices in Salt Lake City, UT; Chicago, IL; Exton, PA; and Naples, FL.
Find out more
“We’ve got challenges to face, we’ve got portfolios that we’re watching, we’re looking at our clients, and trying to look for stress cracks with regard to the financial distress of their companies”
Mark Paccione
AXIS Insurance
“Underwriters must be aware of this trend [of social inflation] and bake that into their pricing and terms and conditions based on the given product line”
Stephen Swartley,
Arch Insurance
“We can’t sit back and say, ‘Things are looking good, look at the last two years!’ We need to look at the last 10 to 20 years, and then also try to look into a crystal ball and say, ‘How are things going to develop over the next two, five, 10 years?’”
Richard Bryant
Prime insurance
In Partnership with
Tackling new challenges in management liability
As the pandemic wanes, economic challenges are affecting businesses, putting board members and managers at risk of lawsuits. Three experts and leaders in the management liability space share their insights into this issue
Read on
Richard Bryant
Prime Insurance
Mark Paccione
AXIS Insurance
Stephen Swartley
Arch Insurance
Industry experts
Arch Insurance North America is part of a global insurer offering superior coverage and service. We participate in specialty lines where the talent and knowledge of our employees are a competitive differentiator. We serve North America from offices in the United States and Canada, providing superb coverage and claims handling through careful and diligent underwriting of risks and business-friendly solutions. With 20 years of operating history and strong financial ratings, our track record remains solid.
Find out more
AXIS Insurance is a leading provider of specialty insurance globally. Coverage is backed by the financial strength and solid claims-paying ability of the AXIS Insurance companies.
In an uncertain world, working with the experts at AXIS Insurance enables people and organizations to take necessary risks to realize their ambitions while providing them with peace of mind in knowing they are covered should the unexpected happen. We understand the challenges that clients face, and through our specialist insurance solutions and excellent service we help them to navigate the complexities and manage and mitigate their risks.
Find out more
Prime Insurance Company is an excess and surplus (E&S) lines insurance company, specializing in property and casualty insurance for specialty and unique risks. Prime writes E&S business in all 50 states and is rated A (Excellent) by A.M. Best. By managing underwriting, policy services, risk management, and claims handling in-house, we have a proven track record of providing insurance services in a cost-effective, focused manner with both the producer and the insured in mind. Prime currently produces in excess of $400 million gross premiums annually and has offices in Salt Lake City, UT; Chicago, IL; Exton, PA; and Naples, FL.
Find out more
Stephen has over twenty years of experience in management liability and product line expertise in directors’ and officers’ liability, employment practices liability, fiduciary liability, fidelity, kidnap & ransom, and cyber liability. Prior to joining Arch in June 2009, he served in a variety of underwriting and managerial positions in management liability at The Hartford and as an underwriter at Reliance National.
Arch Insurance
Stephen Swartley
Mark joined AXIS more than 10 years ago and has been in his current role since 2016. He previously spent more than 18 years with Chubb in various underwriting and leadership roles. He then spent two years at Everest launching the management liability insurance platform. Mark is actively involved with PLUS and formerly served on the board of directors for the Insurance Federation of New York (IFNY).
AXIS Insurance
Mark Paccione
Richard started his career at a Lloyds Syndicate in 1985. He is an experienced senior underwriter and business leader, with a deep knowledge of Lloyd’s and the North American, MGA, and professional liability markets. Most recently, he was named president of underwriting at Prime Insurance as of March 2022. He has been involved with Prime for close to 25 years, offering support by way of capacity in the early years and watching it grow to the company it is now. It was Prime’s expertise and iron will in dealing with claims that was Richard’s overwhelming rationale for joining.
Prime Insurance
Richard Bryant
“We’ve got challenges to face, we’ve got portfolios that we’re watching, we’re looking at our clients, and trying to look for stress cracks with regard to the financial distress of their companies”
Mark Paccione,
AXIS Insurance
“Underwriters must be aware of this trend [of social inflation] and bake that into their pricing and terms and conditions based on the given product line”
Stephen Swartley,
Arch Insurance
“We can’t sit back and say, ‘Things are looking good, look at the last two years!’ We need to look at the last 10 to 20 years, and then also try to look into a crystal ball and say, ‘How are things going to develop over the next two, five, 10 years?’”
Richard Bryant,
Prime insurance
In Partnership with
Tackling new challenges in management liability
As the pandemic wanes, economic challenges are affecting businesses, putting board members and managers at risk of lawsuits. Three experts and leaders in the management liability space share their insights into this issue
Read on
Richard Bryant
Prime Insurance
Mark Paccione
AXIS Insurance
Stephen Swartley
Arch Insurance
Industry experts
Arch Insurance North America is part of a global insurer offering superior coverage and service. We participate in specialty lines where the talent and knowledge of our employees are a competitive differentiator. We serve North America from offices in the United States and Canada, providing superb coverage and claims handling through careful and diligent underwriting of risks and business-friendly solutions. With 20 years of operating history and strong financial ratings, our track record remains solid.
Find out more
AXIS Insurance is a leading provider of specialty insurance globally. Coverage is backed by the financial strength and solid claims-paying ability of the AXIS Insurance companies.
In an uncertain world, working with the experts at AXIS Insurance enables people and organizations to take necessary risks to realize their ambitions while providing them with peace of mind in knowing they are covered should the unexpected happen. We understand the challenges that clients face, and through our specialist insurance solutions and excellent service we help them to navigate the complexities and manage and mitigate their risks.
Find out more
Prime Insurance Company is an excess and surplus (E&S) lines insurance company, specializing in property and casualty insurance for specialty and unique risks. Prime writes E&S business in all 50 states and is rated A (Excellent) by A.M. Best. By managing underwriting, policy services, risk management, and claims handling in-house, we have a proven track record of providing insurance services in a cost-effective, focused manner with both the producer and the insured in mind. Prime currently produces in excess of $400 million gross premiums annually and has offices in Salt Lake City, UT; Chicago, IL; Exton, PA; and Naples, FL.
Find out more
Richard started his career at a Lloyds Syndicate in 1985. He is an experienced senior underwriter and business leader, with a deep knowledge of Lloyd’s and the North American, MGA, and professional liability markets. Most recently, he was named president of underwriting at Prime Insurance as of March 2022. He has been involved with Prime for close to 25 years, offering support by way of capacity in the early years and watching it grow to the company it is now. It was Prime’s expertise and iron will in dealing with claims that was Richard’s overwhelming rationale for joining.
Prime Insurance
Richard Bryant
Mark joined AXIS more than 10 years ago and has been in his current role since 2016. He previously spent more than 18 years with Chubb in various underwriting and leadership roles. He then spent two years at Everest launching the management liability insurance platform. Mark is actively involved with PLUS and formerly served on the board of directors for the Insurance Federation of New York (IFNY).
AXIS Insurance
Mark Paccione
Stephen has over twenty years of experience in management liability and product line expertise in directors’ and officers’ liability, employment practices liability, fiduciary liability, fidelity, kidnap & ransom, and cyber liability. Prior to joining Arch in June 2009, he served in a variety of underwriting and managerial positions in management liability at The Hartford and as an underwriter at Reliance National.
Arch Insurance
Stephen Swartley
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Copyright © 2022 Key Media
People
Terms & conditions
Privacy policy
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About us
Contact us
RSS
Asia
NZ
AU
CA
US
UK
contact us
specialty
Best Insurance
Resources
RISK MANAGEMENT
News
Copyright © 2022 Key Media
People
Terms & conditions
Privacy policy
Conditions of use
About us
Contact us
RSS
Asia
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AU
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47.3
54.0
50.4
47.8
53.4
49.5
52.9
59.8
56.7
61.5
54.7
Source: S&P Global Market Intelligence
Direct premiums written ($M)
Direct incurred loss ratio (%)
H1'11
H1'12
H1'13
H1'14
H1'15
H1'16
H1'17
H1'18
H1'19
H1'20
H1'21
50
45
40
35
30
55
60
65
4,000
3,000
2,000
1,000
0
5,000
6,000
7,000
D&O premiums nearly double amid pandemic
Direct premiums written ($M)
Direct incurred loss ratio (%)
47.3
54.0
50.4
47.8
53.4
49.5
52.9
59.8
56.7
61.5
54.7
Data compiled Sept. 30, 2021
Data is sourced from the Director and Officer Insurance Coverage Supplement of the annual National Association of Insurance Commissioners statutory property and casualty statements. US filers only.
Chart information is based on the as-reported information from monolines policies and excludes values recorded within commercial multiperil package policies.
Direct premiums written ($M)
Direct incurred loss ratio (%)
H1'11
H1'12
H1'13
H1'14
H1'15
H1'16
H1'17
H1'18
H1'19
H1'20
H1'21
50
45
40
35
30
55
60
65
4,000
3,000
2,000
1,000
0
5,000
6,000
7,000
D&O premiums nearly double amid pandemic
Direct premiums written ($M)
Direct incurred loss ratio (%)
47.3
54.0
50.4
47.8
53.4
49.5
52.9
59.8
56.7
61.5
54.7
Data compiled Sept. 30, 2021
Data is sourced from the Director and Officer Insurance Coverage Supplement of the annual National Association of Insurance Commissioners statutory property and casualty statements. US filers only.
Chart information is based on the as-reported information from monolines policies and excludes values recorded within commercial multiperil package policies.
Direct premiums written ($M)
Direct incurred loss ratio (%)
H1'11
H1'12
H1'13
H1'14
H1'15
H1'16
H1'17
H1'18
H1'19
H1'20
H1'21
50
45
40
35
30
55
60
65
4,000
3,000
2,000
1,000
0
5,000
6,000
7,000
D&O premiums nearly double amid pandemic
Direct premiums written ($M)
Direct incurred loss ratio (%)
Source: S&P Global Market Intelligence
Source: S&P Global Market Intelligence
Data compiled Sept. 30, 2021
Data is sourced from the Director and Officer Insurance Coverage Supplement of the annual National Association of Insurance Commissioners statutory property and casualty statements. US filers only.
Chart information is based on the as-reported information from monolines policies and excludes values recorded within commercial multiperil package policies.
JUROR DISTRUST
GROWING
GENERAL
LIABILITY
LOSSES
Jurors often seek to punish offending companies with large verdicts
ESCALATING VERDICTS
Third parties with interest in case's outcome front the plaintiff's legal fees
LITIGATION FUNDING
Third parties with interest in case's outcome front the plaintiff's legal fees
CAUSE AND EFFECT OF SOCIAL INFLATION
Source: Liberty Mutual Insurance
JUROR DISTRUST
GROWING
GENERAL
LIABILITY
LOSSES
Jurors often seek to punish offending companies with large verdicts
ESCALATING VERDICTS
The normalization of big numbers tends to increase jury awards and settlements
LITIGATION FUNDING
Third parties with interest in case's outcome front the plaintiff's legal fees
CAUSE AND EFFECT OF SOCIAL INFLATION
Source: Liberty Mutual Insurance
