Peter Carozza, regional head of private company management liability for North America financial lines at Allianz, confirmed that D&O capacity continues to exceed demand, leading to a third consecutive year of rate decreases in 2024.
Macroeconomic and geopolitical instability including the conflicts in Ukraine and the Middle East, coupled with the U.S. election year intensified market uncertainty.
Carozza also pointed to ongoing interest rate concerns and their influence on company growth, acquisition strategies, and the ability to attract new D&O capacity.
The directors and officers insurance market has experienced favorable results in recent years, but ongoing risks and market uncertainties could challenge sustainability.
Kevin M. LaCroix, executive vice president at RT ProExec, stated that hard markets are historically rare in the property and casualty insurance cycle. He expects the current soft conditions in the D&O space to persist.
The risks associated with changes in diversity, equity, and inclusion practices, and the potential legal exposure from environmental, social, and governance (ESG) reporting practices.
He cited “greenwashing” as a key issue, where companies may overstate ESG compliance. Carozza added that “AI-washing,” or misleading claims about the use of artificial intelligence, has also emerged as a D&O risk.
The intersection of D&O and cyber risks continues to grow in importance. Blades highlighted concerns about the legal environment, social inflation, and third-party litigation financing. He warned that price declines may not sufficiently offset the increasing loss trends associated with these factors.
AI adoption has introduced underwriting challenges, especially with regard to regulatory scrutiny, shareholder concerns, and litigation risks.
Many companies still lack clear risk management protocols for AI deployment, adding to uncertainty.
Carozza further noted that the rise in bankruptcies prompted underwriters to conduct more detailed financial reviews, especially around debt structures.
Upcoming global events (such as the war in Ukraine, conflict in the Middle East, and U.S.-China tensions) are likely to disrupt supply chains, increase business interruptions, and intensify regulatory oversight.
These factors may bring additional legal risks for directors and officers of multinational companies.
