The directors and officers market remains soft – as it has been for five years – but there are some  signs this could change, the Australasian Professional Indemnity Group conference was told.

Julie Hamilton, Aon’s national D&O practice leader, noted several potential market disruptors like increased M&A and IPO activity, rising securities class actions and emerging cyber claims.

Ewen McKay, head of financial lines at Axa XL, said the market was really waiting for the outcome of the Zonia v Commonwealth Bank court case, which would be “quite crucial for shareholder class actions” with several cases likely to be dependent on the decision.

“If it goes well for the defendants I think there will be some further softening in the market. But our metrics say we must be getting toward the profitability threshold,” he warned.

He explained that while APRA had reported an industry-wide 53% net combined operating ratio, that result was heavily influenced by reserve releases from previous years. For every dollar of new reserves, insurers got 90 cents back from prior years.

The 53% figure “does not represent the profitability of the business we’re writing now”, he said.

Jason Grant, director at Crescendo Underwriting, said the market is not priced for sustainability but there is still perceived profitability and excess capacity still trying to enter the market because of it.

Recent consolidation by acquisition, such as Zurich buying UK specialty insurer Beazley and the previous sale of Inigo, “haven’t taken capacity from the market,” he said.

Mr McKay said Axa's analysis shows there have been 80 resolved securities class actions since 1999 – mostly concerning alleged breaches of continuous disclosure or alleged misleading conduct – with settlements totalling $3.2 billion, plus defence costs. There were 32 open matters with potential settlement values exceeding $1 billion.

Mr Grant assessed that defence costs are typically around $25 million per case, which means companies need to review whether their D&O cover is adequate.

He said that private companies, especially in the financial advice and construction sectors, are now being targeted by regulators just as much as listed companies. Emerging risks include cyber threats and AI.