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An often-quoted saying, "May you live in interesting times," is certainly applicable to the present day — as well as the state of the directors' and officers' liability insurance market.

One of the earliest known citations of this saying, by British statesman and Nobel Peace Prize winner Sir Austen Chamberlain in 1936, expands on the meaning of "interesting" and is perhaps an even more accurate description of D&O risks: "We move from one crisis to another. We suffer one disturbance and shock after another."

With a dramatic increase in securities class-action lawsuits, an avalanche of event-driven litigation and social inflation pushing up the cost of claims, underwriting D&O liability exposures is no simple task. Insurers have become accustomed to litigation trends in the United States, but internationally there historically has been comparatively little litigation to worry about. That has changed. Now, D&O underwriters are seeing rapid changes in both the frequency and severity of claims. Many insurers are having a difficult time pricing for this — and some are opting to withdraw capacity.

D&O liability insurance is a valuable form of protection for public and private companies, and the current market dynamics do not make it easy for these organizations to manage risks amid their many operating challenges. These conditions are an opportunity for Berkshire Hathaway Specialty Insurance to show our commitment to our customers.

A different era for claims

The last time the D&O market experienced such disarray was following the global financial crisis in 2008. The precipitating event at that time was the subprime loan crisis, which became a blame game for financial institutions. 2021 is a different era, with claims arising from a global pandemic. The coronavirus has created liquidity crises across nearly all industries, and it has pushed many organizations to the brink, and more than a few over the edge.

In 2008, it took a few years after federal government bailouts to see claims emerge. COVID-19 relief could have a similar effect, merely delaying a wave of D&O litigation that may hit in two or three years' time. Meanwhile, businesses operating amid the uncertainty of the pandemic must contend with laying off employees, preserving what liquidity they can and — not least — rising insurance costs.

An underwriting and claims organization

Berkshire Hathaway Specialty Insurance has established itself as a primary underwriter in the international D&O marketplace in a short period of time. A big part of assuming a leading role in offering management liability protection is our philosophy as an underwriting and claims organization. Our goal is to realize the value of the insurance product and enable our customers to transfer risks.

"Claims is our product" is not just a nice saying; it's how we approach business every day. A lot of companies talk about underwriting and claims, but those departments may be many miles apart, geographically and philosophically. At Berkshire Hathaway Specialty Insurance, our claims team sits side-by-side with our underwriting team members, and both stay in frequent contact even when we have to work remotely.

We have made a conscious decision to add value to our customers with a broad and diverse offering across industries. Because Berkshire Hathaway Specialty Insurance has a strong balance sheet and does not rely on reinsurance, we have great flexibility to sit down and understand what our customers need and determine the best way to provide significant capacity and solutions.