D&O liability premiums have declined significantly in recent years, with some renewal accounts seeing rate reductions of 20-40%. Beinsure cautioned that this trend is unlikely to continue.
Given the risks corporate officers face and the negative trends affecting claim severity, there needs to be some pricing stabilization.
“I do have a feeling that there will be some stabilization, but rates trending down the way they have been the past couple of years, where there have been significant rate decreases 20, 30, 40% decreases for renewal accounts. At the start of 2025, we’re seeing smaller, single-digit decreases, which suggests the market is adjusting.”
AM Best pointed to emerging risks such as artificial intelligence (AI), advanced technologies, and continued social inflation as factors that could drive higher claim costs.
AI-driven decision-making introduces new liability exposures, and litigation funding remains a major concern.
“These risks make it difficult for premiums to keep declining at the rate we’ve seen in previous years”.
Social inflation, litigation funding are also concerning issues for corporate executives. There are a number of different factors that are increasing the potential risks that corporate directors and officers face, particularly from a loss severity standpoint.
Therefore, I don’t think the recent rate decline trend can continue on. We do need to see some stabilization in terms of rates and pricing.
At the beginning of this year, it appears the rate changes are stabilizing towards smaller decreases, single-digit decreases on a year-over-year basis, with the expanding risks that corporate directors and officers are facing, with the exposures that AI can bring in terms of companies that are utilizing AI in their strategies and in their decision making, and the risks that might emanate from decisions.
D&O insurers have adapted their underwriting strategies to address changing exposures. Beyond rate adequacy, insurers have adjusted terms and conditions, tightened coverage limitations, and increased self-insured retentions.
Underwriters have taken a more strategic approach, reassessing limits on an account-by-account basis.
“There’s been significant change in policy language, exclusions, and how insurers determine their role in an insured’s overall program,” David Blades explained. These adjustments aim to maintain profitability while managing increased risk.
In terms of terms and conditions, and how they approached the risks that they were writing, that’s also changed in recent years in terms of coverage limitations, exclusions, and self-insured retentions.
That makes the marketplace a little bit different in terms of D&O insurers looking at the uncertainty and looking at the risks they’re facing. Underwriters have done a better job determining their limits profile.
“The evolving approach hasn’t just been about pricing. Underwriting has changed significantly,” Blades said. “That provides some optimism that recent favorable results could continue, despite the challenges ahead.”
With growing risk exposures and a changing regulatory and litigation environment, the D&O insurance market faces a period of adjustment. While profitability has been strong, insurers will need to navigate pricing stabilization and evolving underwriting strategies to maintain long-term sustainability.
