Insurers reassess D&O coverage as risk factors rise

Global conditions in the directors’ and officers’ (D&O) insurance market are shifting as insurers recalibrate strategies amid ongoing competition and rising litigation risk, according to the latest Gallagher Specialty D&O Global State of the Market Report. While buyers continue to benefit from declining premiums and expanded coverage—driven by an influx of new insurers since 2022—Gallagher warns that the pace of price reductions is slowing, indicating signs of market stabilization into 2025.

Insurers remain keen to grow their portfolios, but many are becoming more selective. Some are now prepared to exit renewals if pricing fails to meet their benchmarks. Coverage enhancements, such as entity investigation coverage, remain widely available, particularly through broker-led policies.

Emerging risks

The report highlights several growing exposures:

• Litigation surge in the US: Securities class-action filings and shareholder lawsuits are on the rise, intensified by record settlements and regulatory investigations.
• Regulatory scrutiny: Insolvencies and increased oversight, especially in Europe and the UK, are adding pressure on boards.
• Technological liability: AI-related exposures, particularly concerns about “AI washing,” are emerging as a regulatory and reputational risk.
• Employment claims: Workplace litigation is expanding globally, driven by diversity, equity and inclusion mandates, as well as new worker protections.

Political changes, activist investor actions, and economic volatility further complicate the risk environment for directors and officers, the report highlighted.

Regional outlooks: Competitive yet cautious

• United Kingdom: Insurers are leaning toward long-term agreements to lock in favorable rates, even as insolvency and employment dispute notifications rise. Coverage remains broad.
• United States: Capacity continues to expand, with flexible terms and broader coverage offered by London markets. However, regulatory uncertainty looms.
• Europe: Despite premium decreases, increased claims severity and legal costs are pushing insurers to refocus on sustainable growth.
• Australia: Pricing declines are slowing. Innovation in policy wordings and growing attention to low-excess layers mark insurer strategies.

Ancillary coverage trends

The market for commercial crime, pension trustee liability and employment practices liability (EPL) is also evolving:

• EPL: Claims are climbing, notably in discrimination, harassment and retaliation. Legislative changes in the UK and collective actions in the EU are expected to further impact this line.
• Crime coverage: Insurers are offering better terms and wider availability, with a focus on social engineering fraud.
• Pension liability: As more pension schemes are transacted, demand for coverage is growing, particularly around run-off placements.

Gallagher emphasizes the importance of early and strategic engagement with insurers and brokers to navigate the changing environment. Buyers are advised to regularly reassess coverage, manage long-tail claims risk and build insurer relationships for long-term value.

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