1930s - Great Depression- Creation of Securities Acts of 1933 and 1934

● New securities laws create protection for investors. Directors and officers have a higher fiduciary responsibility to ensure they are doing things correctly and increased liability with these new regulations.

● D&O insurance starts being offered by London to provide a risk transfer solution to manage this new exposure; however, with a few notable exceptions, there is not much D&O litigation and as such not much market demand for the insurance.

1940s - 1950s - D&O Liability Awareness Increases

● Many state legislatures enact laws allowing corporates to indemnify directors and officers.

1960s - Market Growth

● Market demand for D&O insurance begins to increase as changes to state laws allow for companies to indemnify the people who ran them. With corporate indemnification present, litigation becomes more prevalent.

● The insurance marketplace returns full-force at this time and markets other than Lloyd's of London begin to offer D&O coverage.

Late 1960s -1970s - Capacity Increases

● Approximately 70 percent of public companies are buying D&O insurance according to market surveys.

● More carriers jump into the market and offer D&O for the first time with broad policy terms and conditions but inadequate pricing.

1980s - Market Crash & Insurance Crisis

● Vast majority of public companies are buying D&O insurance.

● Delaware Court ruling Smith v. Gorkom (1985) holds outside directors and officers liable, suggesting a broader scope of potential liability than had previously been assumed.

● An exponential increase in D&O claims and defense costs, stock market crash of 1987, bank and oil company failures and reinsurance capacity issues push insurance industry into crisis.

● D&O insurance market hardens due to mass exodus of insurance carriers, including eight of the top 10 D&O insurers by 1984. Three mainstay players: Chubb, AIG, and Lloyd's remain but rates and forms change dramatically.

● Premiums increase by 200 percent on renewals for 80 percent of accounts, according to firms that reported to a 1986 Wyatt D&O Survey as capacity dwindles.

● As litigation emerges in the private company sector, D&O solutions for non-public risk start appearing.

1995 - Private Securities Litigation Reform Act (PSLRA)

● Industry views PSLRA tort reform as a significant win providing a deterrent against frivolous securities litigation which was pervasive.

● On the heels of the Nordstrom decision and the passage of the PSLRA, D&O forms evolve in a significant way to include Side C- Entity Coverage.

● Following tort reform, many new carriers are attracted to the D&O space and capacity increases dramatically.

● More capacity leads to broader D&O policy terms and cheaper rates via market competition.

● Along with the growth of D&O in the private company space, non-profit organizations also start carrying D&O as a standard component of their insurance program.

1990s - Tech, IPO Boom

● Landmark cases, such as the 1995 Nordstrom, Inc. v. Chubb & Son, Inc., change how carriers approach management liability risk in regards to how indemnity loss is allocated on D&O contracts. In this case, the U.S. Court of Appeals for the Ninth Circuit rejects Federal Insurance Co. and Chubb's argument that the corporation was a co-defendant with the directors and officers so "a portion of the settlement should be allocated to and paid by the corporation, not the insurer." (ACE Report, Issue 19, July 1995).

● Carriers start to contemplate Entity Coverage (Side C) options in response to the decision.

September 11, 2001 - Terrorist Attacks

● Significant new long-term D&O players (Arch, Axis, Allied World) come into the market post 9/11 to respond to a need for more capacity for other lines of insurance.

2001 - 2003 - Hard Market

● Securities fraud litigation cases increase dramatically to 483 filed in 2001.

● Huge D&O losses hit carriers as a result of expanded D&O entity coverage and too low pricing in the late 1990s.

● Corporate scandals (Enron) and bursting of tech bubble reduce insurance capacity for D&O insurance. Hard market lasts until around 2003.

2002 - Sarbanes Oxley (SOX) Act

● Changes the regulation of financial practice and corporate governance. SOX creates new standards that hold directors and officers accountable for financial conditions, operational controls and reporting on the company.

● D&O carriers begin to place more emphasis on SOX governed and regulated operational controls. D&O policy language also evolves to address new exposures board members face as a result of the heightened level of accountability from SOX regulations, including corporate governance and how carriers view corporate risk.

● Going forward, underwriters will have to continuously update policy language and contracts to address the various needs of directors and officers as litigation tied to certain SOX statutes continues.

2007 - Financial Crisis and Recession Begin

● Leads to consumer backlash against corporate America and increased scrutiny of Wall Street and large financial companies.

● D&O carriers are highly exposed to the crisis across multiple industry groups as balance sheets take significant losses and bankruptcies increase.

2010 - Dodd-Frank Wall Street Reform and Consumer Protection Act

● Put in place to prevent corporations from being "too big to fail." Creates a myriad of regulations for which D&O policies evolve to respond.

2013 - Widespread Acceptance of D&O Insurance, More Disciplined D&O Market

● It's estimated that 75 to 80 percent of private companies buy D&O insurance, which is often combined with employment practices liability insurance.

● Nearly all U.S. public companies purchase D&O.

● Policies are living contracts that evolve constantly to address the needs of individual directors and officers in response to a fluid regulatory environment.

● While capacity remains strong, after nearly a decade of declining rates premiums are on the rise as carriers attempt to keep pace with litigation trends and costs.