According to industry data, most D&O insureds saw meaningful premium decreases from 2022-23 that tapered to flat or slight reductions by 2024, with average rate reductions hovering around 2% throughout 2025. Even as the market remains buyer-friendly, it’s showing signs of stabilization, with overall premium fluctuations becoming smaller and more selective. Public companies continue to experience the most favorable segment conditions, evidenced by consistent year-over-year rate reductions across primary layers. Because private companies are often deemed higher risk by insurers than their public counterparts, they have historically faced more mixed results in pricing structures and coverage offerings. Nonetheless, some policyholders—namely those with strong financial practices and minimal loss history—are still experiencing softening conditions, with new and returning capacity keeping market competition elevated across the private sector.
Current Market Trends and Cost Drivers
• Securities class action risks—As stakeholders and the public demand greater transparency and accountability from corporate executives, these leaders are facing a surge in securities class action lawsuits and associated D&O claims for their alleged wrongdoings in the boardroom. According to a recent report from the National Economic Research Associates (NERA), 229 federal securities class action lawsuits were filed in 2024, matching the previous year’s total and remaining above the 10- year average. While this litigation can impact any industry, businesses operating in the technology and health care sectors accounted for over half of all filings. Altogether, Cornerstone Research reported that securities class action lawsuits led to 88 settlements in 2024, totaling $3.7 billion. While median plaintiff-style damages decreased from 2023-24, they still represented the third-highest amount over the past decade at $272 million, driving up D&O claims severity.
• AI challenges—With corporate executives increasingly leveraging AI tools to make important board decisions and conduct their due diligence processes, such utilization is fueling new D&O exposures. Specifically, business leaders who misrepresent the ways in which AI solutions are being used in the workplace or fail to address operational errors caused by this technology—such as those resulting from algorithmic biases, stolen intellectual property, hallucinations or other harmful synthetic content—may be vulnerable to shareholder derivative lawsuits and associated D&O claims. Complicating matters, regulators and plaintiff firms have begun challenging both the actions and inactions of corporate executives in their approach to AI tools over the past year, holding these leaders accountable for inaccurate AI disclosures as well as poor oversight and governance.
• Securities and Exchange Commission (SEC) enforcement shifts—In 2025, President Donald Trump appointed a new chairman of the SEC, paving the way for a change in enforcement efforts toward public companies and related D&O claims. This chairman has pushed for the agency to return to a “back-to-basics” approach, dropping various enforcement actions from prior years and prioritizing traditional fraud cases and investor protections over recordkeeping violations and broad corporate penalties. Since the new chairman was appointed, the SEC has reduced its staff by approximately 15% and withdrawn 14 proposed rules, marking a considerable shift toward deregulation. As it pertains to specific rules established under the previous administration, the climate disclosure rules have been paused for several months and remain in a state of litigation limbo, indicating a potential reduction in SEC-driven ESG enforcement actions from the agency going forward. Although federal enforcement actions and settlements against individual business leaders could still occur in this environment, the shift primarily signals reduced regulatory pressure from the SEC. At the same time, overall D&O exposure remains materially influenced by active private securities class actions and other regulators.
Article Published By: Zywave, Inc.
