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The Market for Directors’ and Officers’ Insurance

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  • Stephen G. Fier
  • Andre P. Liebenberg

Abstract

Directors’ and officers’ (D&O) liability insurance is a commonly used risk management tool for corporations both in the United States and abroad. While prior research has focused on the demand for D&O insurance and its role in corporate governance, there is an absence of literature on the supply side of the D&O market. Using the newly available D&O Insurance Coverage Supplement to insurers’ statutory filings, we develop a more comprehensive understanding of the D&O insurance market and of those firms that write D&O coverage. We develop and estimate a model of the decision to write D&O insurance and the extent of market participation. Our results suggest that there are significant operational and financial differences between firms that supply D&O insurance and those that do not. Several of these differences (specifically, size, diversification, and organizational form) are consistent with the predictions of the managerial discretion hypothesis.

Suggested Citation

  • Stephen G. Fier & Andre P. Liebenberg, 2014. "The Market for Directors’ and Officers’ Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 17(2), pages 215-239, September.
    • Handle: RePEc:bla:rmgtin:v:17:y:2014:i:2:p:215-239
    DOI: 10.1111/rmir.12023
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    References listed on IDEAS

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