Overview
The directors and officers (D&O) liability insurance market in the United States continues to experience pressures from new technologies, economic volatility, and geopolitical tensions. D&O liability premiums have declined significantly in recent years, with some renewal accounts seeing rate reductions of 20–40%, as noted in AM Best’s report. Beinsure analyzed the report and highlighted the key points.
Despite a decline in premium volume and challenging underwriting conditions, 2024 marked the most favorable loss experience for D&O insurers in over 10 years.
This result stemmed partly from substantial reserve takedowns from previous accident years during the hard market peak, which supported strong quarterly and year-end results.
However, claims from the soft-market years of 2016–2019 developed adversely in 2024 and continue to present challenges.
Key highlights
- D&O insurers recorded their strongest loss performance in over a decade in 2024, supported by reserve releases from earlier hard-market years, even as premium volume declined and underwriting remained challenging.
- The D&O market stayed soft for the third consecutive year, with capacity exceeding demand. Rate reductions persisted, driven by macroeconomic uncertainty, geopolitical instability, and limited pricing discipline.
- Emerging technologies, particularly artificial intelligence, introduced new exposures. Legal risks from securities litigation, ESG disclosures, and increased scrutiny of corporate governance continued to expand.
- The intersection of cyber threats and D&O liabilities grew in significance. Rising legal costs, third-party litigation financing, and inadequate pricing trends pose long-term profitability concerns for insurers.
- Changes in U.S. policy under the Trump administration, including trade tariffs, labor enforcement, and FCPA prosecution approaches, created additional uncertainty and regulatory risk for corporate officers.
D&O market remains uncertain
David Blades, associate director of industry research and analytics at AM Best, explained that the D&O market remains uncertain due to global economic disruptions and political tensions.
New technologies have introduced additional risks for corporate officers, increasing their exposure.
Blades warned that pricing declines over recent years could result in inadequate premiums in the near term. Furthermore, securities class-action lawsuits and settlements saw a slight increase in 2024, potentially raising loss severity.
D&O insurers have benefited from significant rate increases in 2020, 2021, and early 2022, which addressed pricing adequacy and drove profitability. The strong results have attracted new market entrants and supported existing players.
However, despite these gains, corporate officers face growing risks. A shifting regulatory landscape, economic uncertainty, and the potential impact of a new U.S. presidential administration could pressure corporate decision-making.
Social inflation is still an issue with regards to high settlements and high judgments against corporations in the lawsuits they’re facing. That’s a risk that continue needs to be looked at and addressed.
Litigation funding is still something that’s very meaningful in the marketplace from a loss severity standpoint.
D&O insurance underwriting performance
AM Best identified improved underwriting performance as a positive factor for the market. Although pricing declines continued, the rate of decrease has slowed, which may support premium adequacy.
Insurers have also applied more caution in coverage and capacity decisions, reflecting adjustments based on experience from previous soft-market periods.
However, AM Best maintains a negative outlook for the segment due to rising legal expenses and growing exposures tied to technological risks and pricing trends that may not be sustainable.
D&O insurers have adapted their underwriting strategies to address changing exposures. Beyond rate adequacy, insurers have adjusted terms and conditions, tightened coverage limitations, and increased self-insured retentions.
According to D&O Insurance Insights, recognition of insurers’ reserve redundancies from the most recent accident years may support near-term underwriting results.
Year-to date D&O direct written premiums fell by 11% yoy, and direct earned premiums declined by 9%, based on property/casualty industry aggregate statutory results.
Loss ratios are expected to worsen, as heightened competition has reversed resulting in lower renewal rates. However, the segment direct loss ratio of 53.8% for 2024 was relatively unchanged from 53.6% for 2023 (see Top 5 Risk Trends D&O Insurance Market).
D&O capacity continues to exceed
Peter Carozza, regional head of private company management liability for North America financial lines at Allianz, confirmed that D&O capacity continues to exceed demand, leading to a third consecutive year of rate decreases in 2024.
Macroeconomic and geopolitical instability—including the conflicts in Ukraine and the Middle East, coupled with the U.S. election year—intensified market uncertainty.
Carozza also pointed to ongoing interest rate concerns and their influence on company growth, acquisition strategies, and the ability to attract new D&O capacity.
The directors and officers insurance market has experienced favorable results in recent years, but ongoing risks and market uncertainties could challenge sustainability.
Hard markets are historically rare in the P&C insurance cycle
Kevin M. LaCroix, executive vice president at RT ProExec, stated that hard markets are historically rare in the property and casualty insurance cycle. He expects the current soft conditions in the D&O space to persist.
The risks associated with changes in diversity, equity, and inclusion practices, and the potential legal exposure from environmental, social, and governance (ESG) reporting practices.
He cited “greenwashing” as a key issue, where companies may overstate ESG compliance. Carozza added that “AI-washing,” or misleading claims about the use of artificial intelligence, has also emerged as a D&O risk.
D&O and cyber risks continues to grow
The intersection of D&O and cyber risks continues to grow in importance. Blades highlighted concerns about the legal environment, social inflation, and third-party litigation financing. He warned that price declines may not sufficiently offset the increasing loss trends associated with these factors.
AI adoption has introduced underwriting challenges, especially with regard to regulatory scrutiny, shareholder concerns, and litigation risks.
Many companies still lack clear risk management protocols for AI deployment, adding to uncertainty.
Rise in bankruptcies prompted underwriters to conduct more reviews
Carozza further noted that the rise in bankruptcies prompted underwriters to conduct more detailed financial reviews, especially around debt structures.
Upcoming global events—such as the war in Ukraine, conflict in the Middle East, and U.S.-China tensions—are likely to disrupt supply chains, increase business interruptions, and intensify regulatory oversight.
These factors may bring additional legal risks for directors and officers of multinational companies.
Effects of Trump administration policies on D&O insurance
LaCroix addressed the potential effects of Trump administration policies on D&O insurance. Trade tariffs could create inflationary pressure and disrupt supply chains.
Measures against undocumented labor could affect industries like agriculture, construction, food processing, and hospitality.
Moreover, changes to white-collar crime enforcement, particularly in the interpretation of the Foreign Corrupt Practices Act, may alter the types and volumes of legal actions that companies face.
FAQ
The D&O market faces increasing pressure from technological developments, economic volatility, and geopolitical instability. New risks from AI, global conflicts, and shifting legal landscapes are adding to insurer concerns, especially as pricing remains soft.
Despite underwriting challenges and falling premiums, 2024 produced the best loss results for D&O insurers in over a decade. This performance was driven by significant reserve releases from prior hard-market years, which strengthened quarterly and year-end results.
Underwriting improved in 2024, with insurers showing more discipline in coverage and capacity. While pricing continued to decline, the rate of decrease has slowed. Still, AM Best maintains a negative outlook due to growing legal expenses and risk exposures.
D&O capacity continues to exceed demand. This imbalance has led to rate reductions for a third consecutive year. Broader macroeconomic and geopolitical issues, including conflicts and U.S. political shifts, have added further uncertainty to market dynamics.
D&O underwriters now scrutinize ESG claims for “greenwashing” and monitor exaggerated AI usage claims, or “AI-washing.” These practices raise legal exposure, especially as regulators and shareholders increase oversight of company disclosures and practices.
The overlap between D&O and cyber risk is growing. Legal trends such as social inflation and litigation funding increase potential loss severity. AI regulation and usage risks further complicate underwriting decisions, especially in firms lacking clear protocols.
Policies under the Trump administration may impact D&O coverage through trade tariffs, labor restrictions, and enforcement shifts in white-collar crime. These factors could disrupt operations in key industries and increase regulatory scrutiny and legal claims.
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AUTHORS: David Blades – associate director of industry research and analytics at AM Best, Peter Carozza – regional head of private company management liability for North America financial lines at Allianz, Kevin M. LaCroix – executive vice president at RT ProExec
