Choosing a D&O Renewal Date
By McGriff Executive Risk Advisors
Specialists in Executive, Professional, Cyber, and Transaction Risk Insurance
We are often asked by clients and prospects whether one renewal date is better than another. We’ve put together a few helpful pieces of advice for consideration on picking the renewal date that works best for your organization.
Hard versus soft market
During a hard market, a renewal in the first half of the year is advisable while underwriters still have new business goals to reach. Once those numbers are reached, carriers often lack motivation to write new business. In fact, in 2020, some underwriters exceeded their new business quota by the second quarter. In a soft market, however, sometimes the need to meet sales quotas can result in some good deals late in the year, particularly for challenging risks.
A company’s given internal sales and conference cycle, board meeting schedule, and financial reporting deadlines can create stress internally around the time obligations associated with an executive risk renewal. It is important to consider these internal factors when choosing an insurance renewal timeframe to ensure that a sufficient amount of attention can be given to the process, particularly in a hard market where more conversations with carriers may be required.
Depending on the complexity of the Property & Casualty insurance renewal and whether the same individuals are responsible for both P&C and executive risk, some insureds prefer to spread the dates out so as to alleviate the application, underwriting meeting, and information gathering burden.
Dates to avoid
Avoiding certain dates is frankly more important than choosing the perfect renewal date. To maximize underwriter attention, we recommend avoiding the end or beginning of each quarter. In particular, April 1, July 1, and January 1 tend to be heavy renewal dates for many underwriters. Having a renewal on one of these dates can mean an insured can struggle to compete for underwriter attention and bandwidth.
Timing of annual financials
D&O insurance is designed in large part to insure against losses to a corporate balance sheet. As a result, the more recent the financials, the better able carriers are to underwrite to them. For private companies, many carriers won’t accept audited financials that are more than six months old. For public companies, carriers will look to both annual financials and the most recent quarterly financials. The farther out from those that an insured is, the more pressure insureds may feel from underwriters to reveal insider information. Recent financials help alleviate that concern.
Focus tends to decrease and vacation time tends to increase between Thanksgiving and New Year’s Day for many industries, not just insurance. Add to that the fact that public company renewal dates are usually based on the date of IPO and because few IPOs go off between Thanksgiving and Christmas, this is a slower time for many underwriters and thus a common vacation time for many. Additionally, stamp capacity can become a problem late in the year for programs underwritten through the London markets.
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