Projected Risks for Directors and Officers Insurance in 2025

Projected Risks for Directors and Officers Insurance in 2025 | Property & Casualty

After a period of volatility driven by cyber threats, regulatory changes and shifting litigation trends, the directors and officers (D&O) insurance market has stabilized. Increased competition has led to lower premiums and broader coverage, but emerging risks could reshape the landscape in 2025.

Current Market Landscape

Since 2022, the D&O market has softened, leading to increased capacity and competitive pricing. The cost of $1 million in coverage fell by 5.2% in Q2 2024, with 68% of primary policies seeing price decreases. However, experts predict this trend may not last, and premium increases could return in 2025 due to rising litigation costs and evolving regulatory pressures.

Emerging Risks for Directors & Officers

AI-Driven Boardroom Exposures

AI is transforming how organizations operate, simulating cognitive functions like learning, problem-solving and decision-making. Many corporate leaders leverage AI to streamline processes, analyze complex data and support key business decisions. A recent study revealed that 69% of public companies utilize AI tools in their due diligence processes.

While AI offers significant benefits it also introduces unique risks. Improper implementation or reliance on inaccurate inputs can perpetuate biases, generate errors, compromise data privacy and reduce corporate transparency. Many boards lack full visibility into how AI is applied, particularly by third-party vendors, leaving organizations vulnerable to accountability issues.

Legal & Ethical Challenges

The rise of AI washing, where organizations misrepresent their AI capabilities to attract investors, has raised concerns about transparency and ethical practices. Scrutiny over such claims can lead to reputational damage, regulatory penalties and lawsuits targeting senior leadership.

Adding complexity, the regulatory landscape surrounding AI continues to evolve. In the U.S., various federal, state and local laws govern AI’s use in corporate settings, requiring organizations to define clear policies, mitigate biases and ensure oversight. Globally, the European Union’s Artificial Intelligence Act, approved in 2024, is the first comprehensive AI law. It categorizes AI applications into four risk levels and enforces stringent compliance requirements, with severe fines for violations. This legislation is expected to influence global AI standards and regulatory expectations.

Shifting Litigation Landscape

The D&O market has been shaped by waves of litigation. Between 2018 and 2021, publicly traded companies and their senior leaders faced a surge in claims driven by alleged breaches of U.S. Securities and Exchange Commission (SEC) requirements, as well as challenges associated with IPOs and special purpose acquisition company (SPAC) transactions. While this wave of litigation eased in 2022 and 2023, concerns are resurfacing that 2025 may bring renewed challenges, especially through securities class action (SCA) lawsuits.

Securities Class Action Litigation Resurgence

These lawsuits occur when shareholders claim financial losses due to securities law violations, often linked to inaccurate financial statements or disclosures. Over the past decade, SCA filings have nearly doubled, peaking at 268 cases in 2019 (excluding merger-related and derivative cases). While cases declined in 2022 and 2023, 2024 estimates suggest 200 SCA filings by year-end, potentially the highest since 2020.

The increase has been attributed to heightened regulatory scrutiny from the SEC, which has adopted a more aggressive stance. In particular, the agency has intensified its focus on corporate disclosures and practices tied to emerging risks (e.g., AI). Additionally, the SEC’s new cybersecurity disclosure rules require companies to report material cyber incidents within four days and disclose cyber risk management strategies and boards’ roles in oversight.

Growing Concern About Cybersecurity

Cyber attacks remain a significant source of risk for directors and officers. Following a cyber attack, decisions made by senior leaders often face intense scrutiny, with potential D&O claims arising from allegations of inadequate measures to protect stakeholders’ information, failure to implement adequate controls or delayed incident reporting. Cybersecurity has emerged as a top priority for global boards, as ransomware and digital warfare exposures escalate. A recent survey revealed that 62% of global directors consider cyber attacks, data loss and digital crime among their primary D&O risks.

ESG Issues & Influence

ESG activism has become a significant force in the D&O market. Stakeholders, regulators and the public are increasingly holding senior leaders accountable for upholding corporate ESG commitments. This shift has driven a rise in litigation and D&O claims, particularly related to environmental initiatives.

Climate Change

The increasing frequency of natural disasters, deforestation and biodiversity loss has heightened scrutiny of corporate climate-related practices. Many ESG-related lawsuits claim senior leaders failed to disclose the material risks of climate change or adequately promote environmentally friendly operations. This trend gained momentum with the SEC’s issuance of its final climate risk disclosure rule in March 2024. This regulation requires companies to include detailed climate-related information in their annual reports, including:

  • Risks that may impact operations
  • Greenhouse gas emissions
  • Board oversight of climate initiatives

On the international front, organizations like the European Union and the International Sustainability Standards Board (ISSB) have introduced similar requirements, signaling a global push for ESG transparency.

ESG & the Insurance Market

While anti-ESG sentiment persists, insurers increasingly consider ESG practices when assessing risks. Companies with robust ESG programs are often viewed as lower-risk entities, resulting in more favorable coverage terms and reduced premiums. This trend underscores the value of proactive ESG measures, even amid regulatory uncertainty. It’s worth noting that while some federal priorities may be shifting, insurers still often view companies with solid ESG practices as lower risk, leading to more advantageous coverage and premium structures.

Macroeconomic Factors to Watch

The current economic climate presents a mix of uncertainty and resilience, with several key trends shaping the D&O insurance landscape.

Bankruptcy & Insolvency

Bankruptcy filing under Chapter 11 surged by nearly 52% from 2023 to 2024, driven by higher interest rates and inflation. The commercial real estate market faces significant challenges, with $1.7 trillion in debt maturing between 2024 and 2026, posing refinancing risks for companies.

Geopolitical Issues

Ongoing conflicts (e.g., Russia-Ukraine war, Middle East tensions) demand increased vigilance from directors and officers of global companies. They must demonstrate robust risk management strategies to mitigate these pressures.

Merger & Acquisition (M&A) Activity

A slowdown in M&A activity has reduced immediate demand for D&O insurance, driving competition and potentially lowering premiums. Insurers may shift focus to other risks, reassessing their pricing strategies.

U.S. Economic Resilience

Despite these challenges, the U.S. economy has shown signs of resilience. Fears of a recession have largely subsided, and GDP growth has remained strong. The Organisation for Economic Co-operation and Development projects U.S. GDP growth of 2.6% in 2024 and 1.6% in 2025. What’s more, the U.S. stock market index has reached record highs, signaling economic optimism, though market volatility may still contribute to investor concerns and litigation.

Want to dive deeper into the P&C market trends shaping your business in 2025? Download our comprehensive P&C Market Outlook today to stay ahead of emerging risks and evolving coverage options.

Risk Management Strategies

  • Optimize program structure and limits. Work with an insurance advisor to tailor coverage to market conditions and organizational needs.
  • Seek expert guidance. Partner with advisors, loss control experts and underwriters to manage exposures and control costs.
  • Evaluate leadership’s AI risk. Establish clear policies and procedures to ensure ethical and transparent AI use in decision-making.
  • Strengthen compliance. Ensure SEC adherence and transparent practices to minimize legal exposure.
  • Promote financial transparency. Adopt safe financial practices (e.g., timely payments, educated investments, accurate documentation) and clear stakeholder communication.
  • Enhance cybersecurity resilience. Implement robust security measures and incident response plans.
  • Prioritize ESG Initiatives: Develop realistic sustainability programs and ensure compliance with reporting standards.

We’re Here to Help Protect Your Senior Leadership

Industry experts are forecasting D&O insurance premiums will remain flat. Rest assured, you’re not alone in facing these challenges. Our brokers are uniquely positioned to offer you invaluable risk management strategies, encompassing both forecasted industry trends and insights to make your organization attractive to underwriters. Connect with a member of our team to learn more about the comprehensive guidance and support we can offer.


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Projected Risks for Directors and Officers Insurance in 2025 | Property & Casualtyhttps://www.cbiz.com/LinkClick.aspx?fileticket=Pm8_t7AtBFw%3d&portalid=0Discover the latest directors & officers insurance trends and how they impact market conditions. Ideal for executives and risk managers seeking insights in 2025.2025-02-03T18:00:00-05:00Discover the latest directors & officers insurance trends and how they impact market conditions. Ideal for executives and risk managers seeking insights in 2025.Risk MitigationProperty & Casualty InsuranceYes