Building an Excess Tower: Layering Directors and Officers (D&O) Liability Insurance for Catastrophic Events

Directors and officers (D&O) exposures can escalate quickly during catastrophic events—securities litigation after sudden stock drops, regulatory investigations after mass product failures, or class actions after catastrophic accidents. For U.S.-based organizations—especially those headquartered in hubs like New York, San Francisco, Houston or Chicago—designing a robust D&O excess tower is critical to protecting executives, the balance sheet, and corporate continuity.

This article focuses on practical limit, deductible/retention and allocation strategies for building an excess tower tailored to the U.S. market, with realistic pricing benchmarks and carrier considerations.

Table of Contents

Why an excess tower matters for D&O

Catastrophic claims frequently exceed primary limits. A $5M or $10M primary can be wiped out by a single securities class action or large regulatory penalty defense.
Layers diversify underwriting and capacity risk. Multiple carriers sharing a tower reduces concentration risk and improves overall capacity.
Cost-effective limit expansion. Excess layers allow you to add limits incrementally—often at a lower marginal cost than increasing a single limit.

Tower components and typical structure

A basic D&O tower for a mid-sized U.S. public company might look like:

Primary: $5M (Company buys $5M; attachment point $0)
Excess 1: $5M (limits $5M–$10M; attachment $5M)
Excess 2: $10M (limits $10M–$20M)
Excess 3+: Additional layers to reach $50M–$200M total program

For a private company or large nonprofit, towers often start with a $1M–$5M primary and stack excesses to $5M–$25M.

Example tower snapshot (illustrative)

Layer	Limits	Typical Attachment	Role
Primary	$5M	$0	Lead claims handling, defense obligations
Excess A	$5M	$5M	Follow form; often led by market-leading insurer
Excess B	$10M	$10M	Capacity from national carriers or reinsurers
Excess C	$30M	$20M	Market or facultative placements for catastrophe capacity

Pricing benchmarks and carriers (U.S. market)

Pricing varies by revenue, industry, claims history, public vs private status, and jurisdiction (NY and CA often see higher litigation frequency). Below are approximate U.S. market ranges based on industry reports and carrier small-business guidance:

Small private companies (revenue <$10M): typical premiums for a $1M D&O policy often range from $1,000–$7,500 annually depending on industry and risk profile. Hiscox US small business D&O guidance and similar carriers show entry-level pricing in this band.
Mid-sized private / emerging public companies: for program limits of $5M–$25M, annual premiums commonly range $15,000–$150,000 depending on revenue and elevated risk markers.
Large public companies or high-risk sectors: program limits of $50M–$200M+ can drive premiums from $500,000 to multiple millions annually—pricing driven by SEC exposure, shareholder base, and loss history (see market commentary from Aon and Marsh). Aon D&O market insights and Marsh analyses report elevated premiums in volatile public markets.

Major U.S. carriers supplying tower capacity: Chubb, AIG, Travelers, CNA, The Hartford, Hiscox, Allianz. Chubb and AIG frequently lead large excess placements; Hiscox and The Hartford are active in small-to-mid market coverage.

Sources:

Hiscox small business D&O overview: https://www.hiscox.com/business-insurance/directors-officers-insurance
Market commentary/market reports (Aon, Marsh) for large program pricing trends: https://www.aon.com/ and https://www.marsh.com/

Attachment, retention and deductible strategies

Choosing how losses attach and who retains what portion materially affects price and claims dynamics.

Deductible vs retention: Smaller firms often select a named insured retention (NIR) of $10,000–$100,000; larger firms use retentions of $250,000–$1M+ to lower premium. For public companies, retentions are usually lower to attract top-tier carriers. See details in Deductible vs Retention: Structuring Your Directors and Officers (D&O) Liability Insurance Attachment to Optimize Cost.
Layer attachments: Ensure each excess “follows form” to the primary to avoid defence allocation disputes. Where non-follow-form excess capacity is used, expect higher negotiation complexity and potential coverage gaps.
Self-insured retention (SIR) or captives: Sophisticated firms may use captives or SIRs for the primary layer to reduce cash premiums—see captive strategies in Captive Insurance and Self‑Insured Retentions: Advanced Strategies for Directors and Officers (D&O) Liability Insurance Programs.

Allocation across Side A, B and C

Proper allocation across Side A (individual executives), Side B (company indemnifying executives), and Side C (entity coverage) is essential when towers are built:

Start with Side A standalone capacity if executives can be personally exposed (e.g., insolvency risk). Side A often requires separate limits or non-rescindable wording in the excess layers.
Side B follows indemnity obligations—ensure primary and early excess layers explicitly cover Side B claims to protect corporate balance sheets.
Side C (entity securities) typically consumes the largest portion of high-dollar towers in public companies.

For detailed tactics, read: How to Allocate Limits Across Sides A, B and C in Directors and Officers (D&O) Liability Insurance.

Practical placement tips for catastrophic scenarios

Lead with an experienced primary carrier that will manage claims—carriers like Chubb, AIG or The Hartford are frequently selected as primary for complex placements in NY and CA markets.
Mix market and facultative capacity to reach tail limits—use large global carriers for the first excesses and reinsurers/facultative markets for high-dollar catastrophe layers.
Negotiate wide “follow form” and anti-allocation wording to reduce coverage disputes across layers.
Consider an A-side specific excess for insolvency-triggered claims or covenant breaches—this preserves personal executive protection even if the company cannot indemnify.

Stress-testing and renewal negotiation

Scenario test: simulate a securities class action plus regulatory investigation with combined defense and settlement spend to determine how quickly each layer would be exhausted.
Use stress-test results to negotiate rate-on-line or quota-share reinsurance attachments, or to justify purchasing additional tower layers incrementally.
See techniques in Renewal Negotiation Tips: Increasing Limits without Doubling Directors and Officers (D&O) Insurance Premiums.

Sample budgetary matrix (U.S., illustrative)

Company size / profile	Target Program Limit	Typical Annual Premium (USD)	Typical Primary	Comments
Small private (revenue <$10M)	$1M–$5M	$1,000–$25,000	$1M	Carriers: Hiscox, The Hartford
Mid private / emerging public	$5M–$25M	$15,000–$150,000	$5M	Mix of national carriers + regional reinsurers
Large public / high litigation risk	$50M–$200M+	$500,000–$5M+	$5M–$10M	Lead capacity from Chubb, AIG; large excess from re/insurers

Final checklist before placement (U.S. focus: NY, CA, TX, IL)

Confirm primary carrier willingness to lead and handle claims.
Confirm “follow form” and anti-allocation wording across excess layers.
Validate Side A non-rescindable protection for executive coverage.
Stress-test tower vs realistic catastrophic scenarios (settlement + defense).
Negotiate retentions/deductibles sized to your liquidity and tolerance.

Building a D&O excess tower is a balance of price, capacity, and contractual clarity. For U.S. organizations—particularly in high-litigation states like New York and California—layering thoughtfully with leading carriers (Chubb, AIG, Hiscox, The Hartford) and stress-testing scenarios will ensure executive protection and corporate resilience during catastrophic events.