The Market for Directors’ and Officers’ Insurance

Stephen G. Fier and Andre P. Liebenberg

Risk Management and Insurance Review, 2014, vol. 17, issue 2, 215-239

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.

Date: 2014
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https://doi.org/10.1111/rmir.12023

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Persistent link: https://EconPapers.repec.org/RePEc:bla:rmgtin:v:17:y:2014:i:2:p:215-239

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