Like other risk managers, Dave Hennes, director of risk management at The Toro Co., expected the worst when his insurance policies came up for renewal recently. Good thing he braced himself–the premium for Toro's directors and officers liability insurance jumped 200%. "That was a real tough one, and tough to stomach," says Hennes from the Minneapolis headquarters of the $1.5 billion manufacturer of lawn care products. "From our perspective, the company was doing so well, with our stock at an all-time high, strong product brands, a great story to tell and a good, solid history as far as D&O, with no claims ever," Hennes notes. "But D&O is being priced as a commodity today. Even with underwriters spending a day and a half with our CFO, the best we could get was a 200% increase. What could we do? It's a coverage you simply have to have."

Nearly all of Toro's other insurance policies also leaped in price or are expected to rise upon renewal at the end of the year. The one bright spot is property insurance. "I'm hearing from my broker that we can expect a small decrease," Hennes says, "now that we've carved terrorism out as an exposure."

The Return of Underwriting Discipline