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D&O market is riddled with opportunities

Small and middle market companies are largely uncovered

Of the nearly 6.5 million businesses (excluding self-employed businesses) in the United States, only 1.1 million (17%) are covered by directors and officers liability insurance, according to data compiled by MarketStance, Middletown, Connecticut. The covered businesses account for D&O premiums of more than $5.4 billion, with national accounts (those business employing 1,000 or more employees) providing $3.1 billion in premium, or 56.5% of the total. Middle market companies (those with 50 to 999 employees) account for $1.3 billion (24.2%), and small accounts contribute $1.0 billion (19.2%). By contrast, the small accounts represent the largest number of establishments, with 6.2 million of which only 505,000 (8%) have D&O coverage. Of the 221,000 middle market enterprises, 78,000 (35%) have coverage; and 95% of the 14,953 national accounts are covered.

Not surprisingly, the industries that are dominated by larger businesses also are those with the greatest D&O penetration. Mining leads that category, with 45% of the 15,680 mining enterprises having D&O coverage, followed by transportation, communications and utility businesses, where 42% of the 198,604 businesses are covered. Thirty percent of the 727,846 businesses engaged in finance, insurance and real estate are covered, followed by 24% of the 152,431 manufacturing enterprises. Mining also has the highest average premium at $42,000, followed by manufacturing ($29,000), and transportation, communication and utility ($19,000).

When broken down into smaller subgroups, electrical services boasts the largest premium at $799 million, followed by telephone communications ($252 million), crude petroleum & natural gas ($199 million), and state commercial banks ($192 million).

The Rough Notes region with the greatest penetration is the Northeast, where 20% of the 1.23 million businesses have D&O coverage and pay total premiums of $1.24 billion. The Southeast region has 19% of its 1.44 million businesses covered and contributes $985 million in premium. The Midwestern region shows 17% of its 1.08 million businesses covered, providing $946 million in premium. The Western region is next with 16% of its 1.45 million businesses covered, paying a total of $1.21 billion in D&O premiums. The lowest penetration is in the Southwest, where only 15% of the 1.25 million businesses are covered; they provide $1.05 billion in premium.

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