Many private company executives treat directors and officers (D&O) insurance as a public company concern. The actual claims picture looks quite different. Private D&O coverage touches a broader range of exposures than most clients expect, and the companies least aware of that are often the ones most at risk.
Alan Bond (pictured), private D&O product manager at Travelers, explains the real risk profile of private D&O insurance and the coverage gaps brokers should be addressing with clients today.
Shareholder disputes are part of the private D&O claims picture, but only one part. Private D&O forms provide broader entity coverage than their public counterparts, and that difference shapes what triggers a claim.
"Private D&O insurers still see real claim activity from shareholder disputes," Bond said. "However, they also experience a wider range of claims from other sources because private D&O forms provide broader entity coverage."
That broader trigger range reflects how the product works in practice. Bond said frequency is driven primarily by disputes with customers, competitors, vendors, and suppliers, as well as creditor actions, regulatory investigations, and investor or shareholder litigation involving privately held companies.
"From an industry perspective, economic uncertainty and isolated pockets of financial distress continue to create claim activity," he said.
A common assumption in the private market is that private D&O insurance carries less risk than its public counterpart. Bond pushes back on that.
"It's not less exposed, it's exposed differently," he said. "It has a different risk profile with its own frequency and severity drivers, and it's priced differently as a result."
Private D&O coverage involves a different claimant mix, different triggers, and pricing that reflects a distinct risk profile rather than a reduced version of public D&O. Bond also noted that coverage gives companies and their boards access to technical expertise in defending complex claims, alongside the balance sheet protection it provides.
The consequences of misreading that risk profile fall hardest on smaller companies. Bond said private D&O covers a wide spectrum, from small family-owned businesses to large pre-IPO companies, and that smaller companies are the most underinsured segment.
"Larger private companies are more likely to benchmark limits carefully," Bond said. "Small and mid-size companies may only buy to satisfy a lender requirement and stop there, if they buy at all. Many family-owned businesses skip D&O entirely, assuming private ownership protects them - it doesn't."
The private D&O claims environment was already broad before the current economic cycle. The pressure on private company balance sheets has made it broader.
"Claims commonly arise from a director or officer's duty of care and the scrutiny surrounding management decisions," Bond said. "Creditor and investor disputes tend to spike in distress cycles."
The trend shows up in court filings. Business bankruptcy filings in the US rose 7.1 percent to 24,737 in the year ending December 31, 2025, according to the Administrative Office of the US Courts. Each filing carries the potential for D&O claims against the company's leadership.
Bond points to two specific conditions behind that trend. "With elevated interest rates and tighter capital markets pressuring private company balance sheets, bankruptcy filings and the insolvency-related D&O claims that accompany them are on the rise," he said.
The claims that follow tend to look the same. Creditors allege mismanagement. Minority investors allege breach of fiduciary duty. Both land on the directors and officers of privately held companies.
For many private company clients, the last substantive conversation about their D&O program was the one that set it up. Bond says that needs to change.
The claim drivers Bond describes are not fixed. They follow economic cycles, and the current one has pushed several of them higher. Clients who bought coverage to satisfy a lender requirement and stopped there may be carrying limits that no longer reflect their actual exposure.
"Brokers can help clients understand that private D&O coverage, especially defense coverage, can be triggered by claims from a wide range of claimants involving a variety of allegations," Bond said. "Whether a company is facing technological challenges, regulatory changes, or an overall sense of economic uncertainty, how it protects its directors and officers is critically important."
