All too frequently, insureds lack clarity on the role fiduciary liability insurance plays within the management liability (ML) suite of coverages. That lack of clarity is because many senior level executives don't realize that their responsibilities related to the administration of employee benefit plans — particularly retirement plans — aren't covered by either their organization's Directors & Officers (D&O) Liability insurance or Employment Practices Liability (EPL) insurance.

"Retirement plan sponsors and trustees think they're covered by their organization's D&O or EPL policy," said Jack Rosen, area assistant vice president at RPS. "Yet almost all of those policies have an ERISA [Employee Retirement Income Security Act] exclusion. They don't realize their personal assets are on the line in the event of a claim."

Until recently, fiduciary was a "throw-in coverage," part of a ML package along with D&O and EPL, Rosen explained. And it still is for the least-risky segment of the market: qualified retirement plans with less than $50 million.

The small end of the market will also see the smallest premium rate increases in 2022, ranging from flat to 10%. A larger plan, with a clean claims history, will be in the 10 to 50% range, while those with a less pristine track record could be looking at 100% in 2022.

As insurance companies exit the fiduciary liability market for certain classes, there could be capacity issues in this market in 2022. Plans will also find it harder to obtain their desired limited in the admitted market.

"For fiduciary, you'll need to be best in class to obtain a $10 million primary limit," Rosen stated. "And plan sponsors may have trouble building towers in increments of $10 million."

While larger plans with more than $100 million in assets have borne the brunt of ERISA litigation and claim activity, midsize and even smaller plans aren't necessarily immune.

"At this point most large, qualified plans have been the target of excessive fee litigation," Rosen explained. "So now plaintiff's attorneys are looking for opportunities in the $50 to 100 million in assets part of the market, which is considerably larger."

Rosen advised that plan sponsors and trustees take a closer look at their plan's investment options, share classes and recordkeeping fees, in accordance with their fiduciary responsibilities. He also recommended that they document their meetings, keep minutes and vote to demonstrate that they're actively managing their plan in the best interest of participants.

Learn more about the Management and Professional Liability Market in the 2022 U.S. Management and Professional Liability Market Outlook.

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