Challenges Persist in the US D&O Liability Insurance Market

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 Beinsure’s report.

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.

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.

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.

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.