Evolving dynamics in the management liability market

Not only have younger, less established companies found it difficult to access public capital, but some companies with solid track records also had a difficult time raising funds. With limited access to equity markets, Canadian entities were pushed to debt markets, which have also been a source of financial distress. Throughout the course of 2022, the Bank of Canada instated a contractionary monetary policy at a rapid pace, with overnight rate targets climbing from 0.25% in January of 2022 to 4.25% in December of 2022.[4] Compared to previous years, we see that the overnight rate in December of 2022  was nearly 500% of the average over the last five years.[5] When considering the insolvency risk of a company, lack of access to capital and the increasing cost of the capital which is available, are both increases in exposure. It’s evident that Canadian board members and executives have found themselves navigating a market at a speed and ferocity many have never experienced, presenting a unique risk to D&O insurers.