Anyone who tracks the D&O market will have noticed an apparent contradiction in the data.
Total securities class action filings fell 11% in 2025 to 207, per WTW's 2026 D&O outlook. The median settlement rose 21% to $17 million - a 10-year high - yet average settlement values and total aggregate recoveries both declined. SEC enforcement actions dropped 30% in fiscal year 2025, the lowest level in a decade per D&O Diary analysis of Covington law firm data.
Taken together, those numbers suggest a market in retreat. But the leading indicators point elsewhere.
Larry Fine, management liability coverage leader at Willis, captured the environment at a recent Insurance Business professional risks roundtable.
"For each thing that's good, there's something opposing it," he said. "So while we see the volume of private securities class actions have been going up this year, SEC enforcement is down. You don't really see so much pro-ESG claims, but you see more anti-ESG claims. And so at the same time, you see more AI-related claims - but most of them are not that different from other claims."
WTW's 2026 D&O outlook was explicit about the limitations of settlement data: "Settlement and recovery sums in any given year are not generally reflective of current D&O conditions. They are lagging indicators, often more accurately revealing facts specific to cases filed in previous years."
The record-low $808 million in total SEC monetary settlements in fiscal year 2025 - the lowest since 2012, per WTW - reflects the Trump administration's enforcement posture and the SEC's shift in priorities under chair Paul Atkins. It does not reflect the underlying claims environment that is building from private plaintiff activity, which operates independently of regulatory enforcement trends.
The leading indicator in D&O is filing volume - and filing volume in the AI-related subset is moving sharply upward. As of August 31, 2026, D&O Diary tracking showed 22 AI-related federal securities class action filings for the year, against 16 for all of 2025.
That alone should recalibrate how the headline numbers are being read.
Tariffs represent a newer and underappreciated addition to the claim pipeline. Four tariff-related securities class action suits were filed in 2025, according to NERA, making them "a new phenomenon" in the filing landscape. A securities class action against Dow Inc. filed in August 2025 alleged the company made misleading statements regarding its ability to manage tariff-related headwinds. A shareholder derivative suit against Dow's executives followed the same month. Lockton has flagged that shareholders could file further suits alleging violations of federal securities laws premised on companies' misrepresentation of tariffs' financial and operational impacts in SEC filings - a litigation risk that will grow if earnings guidance proves to have been over-optimistic in a sustained tariff environment.
The ESG signal also requires careful interpretation.
Pro-ESG claims, which dominated the litigation environment in 2022 and 2023, have largely been replaced by anti-ESG challenges - actions targeting companies' ESG commitments on grounds ranging from fiduciary breach to alleged misrepresentation. For publicly traded companies with ESG programs and reporting obligations, litigation risk now runs in both directions simultaneously.
A company that retains its ESG commitments faces anti-ESG challenge risk. A company that rolls back its ESG programs in response to political pressure faces potential breach of commitment claims from investors who valued those programs. The center of that crossfire is not a comfortable place to advise clients from without a clear-eyed review of what the policy commitments actually say and what litigation exposure they carry.
Jacqueline Waters, managing director and practice leader at Aon's FSG Legal and Claims Practice, identified the dynamic that cuts across all of these currents.
"I think it's legal defense expenses that's driving some things," she said. "You can have a variety of rulings and things that can set your case up one way or another for success or not. And the mediation process is still active, busy, and we're seeing a lot of cases still resolved."
Legal defense cost pressure is structural and not captured in settlement figures. A case that ultimately settles for $15 million after two years of litigation has consumed substantial defense expenditure well above that sum. D&O programme reviews need to examine whether defense cost structures - including sublimits on investigation costs and how costs are allocated between the corporate entity and individual directors - are calibrated to an environment where legal costs escalate even when cases ultimately resolve in the client's favor.
The capacity picture provides a clear directional signal.
Fine noted that some carriers have exited the market over the past year, contributing to a shift from reductions to flat renewals across financial lines generally. The return of IPO activity - and to a lesser extent SPAC transactions - has given remaining carriers more selectivity in where they deploy capacity. They are no longer competing to fill budget gaps with whatever business presents itself.
That selectivity is tightening underwriting standards, and clients with complex risk profiles - those with material tariff exposure, significant AI-related investor commitments, or ESG reporting obligations that sit awkwardly with current political conditions - should anticipate more rigorous questioning at renewal, not less.
The aggregate D&O data is useful for reading market cycles. It is not useful for assessing any individual client's position within that cycle.
The specifics that determine a client's exposure - their sector, their disclosure posture, their governance quality, their tariff and macro headwinds, and whether they have cultivated AI-related investor expectations they may not be able to sustain - none of that appears in the headline statistics.
A market correction would trigger concentrated, severe event-driven litigation in technology and AI-adjacent sectors. Plaintiff law firms move quickly when a stock drops sharply on a failed projection. The time to examine a client's disclosure review processes is before that event, not after.
The calm at the aggregate level is real. It is just not the whole story.
