3 Min Read
April 30 - In recent months, Standard & Poor's Ratings Services hasn't been too optimistic about prospects for the directors and officers (D&O) liability insurance industry (see "The Heat Is On D&O Insurers To Manage Volatile Market Risks," published April 11, 2011, on RatingsDirect). Even as rates in a few property and casualty insurance lines began to increase slightly or stabilize over the past year, many industry executives expressed concerns that D&O rate trends for publicly traded companies remained stubbornly negative overall. But President Obama's signing of the Jumpstart Our Business Startups (JOBS) Act on April 5, 2012, may finally give D&O practitioners some good news. In a new report "The JOBS Act Could Expand The D&O Insurance Market, But Can Underwriters Manage The Risks?," published April 30, 2012, Standard & Poor's explores the JOBS Act and its possible implications for the D&O industry. By relaxing certain regulations and providing new means of capital formation, the JOBS Act aims to reduce the burdensome costs of public securities listings and offerings for smaller, growing companies. "This has both positive and negative effects on D&O industry," said Standard & Poor's credit analyst Jason Porter. "If the JOBS Act meets its goal, privately held companies will have better access to capital through public markets, 144A securities offerings, and even the Internet, and more firms would go public via IPOs--all of which could create additional demand for D&O products. This will give underwriters the opportunity to compete for new business rather than fight for existing renewals." But while these opportunities may alleviate some of the intense competition in the industry, they don't come without risks. The JOBS Act may allow for the placement of riskier investments in both public and private offerings, which raises the potential liability that underwriters must assume. As such, underwriters that can successfully address and mitigate these risks stand to benefit the most, while those that take on new business too aggressively may be left with additional losses. The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to firstname.lastname@example.org. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.