The directors and officers (D&O) liability insurance market in the United States continues to experience pressures from new technologies, economic volatility, and geopolitical tensions. D&O liability premiums have declined significantly in recent years, with some renewal accounts seeing rate reductions of 20–40%, as noted in AM Best’s report. Beinsure analyzed the report and highlighted the key points.
Despite a decline in premium volume and challenging underwriting conditions, 2024 marked the most favorable loss experience for D&O insurers in over 10 years.
This result stemmed partly from substantial reserve takedowns from previous accident years during the hard market peak, which supported strong quarterly and year-end results.
However, claims from the soft-market years of 2016–2019 developed adversely in 2024 and continue to present challenges.
D&O insurers have benefited from significant rate increases in 2020, 2021, and early 2022, which addressed pricing adequacy and drove profitability. The strong results have attracted new market entrants and supported existing players.
However, despite these gains, corporate officers face growing risks. A shifting regulatory landscape, economic uncertainty, and the potential impact of a new U.S. presidential administration could pressure corporate decision-making.
Social inflation is still an issue with regards to high settlements and high judgments against corporations in the lawsuits they’re facing. That’s a risk that continue needs to be looked at and addressed.
Litigation funding is still something that’s very meaningful in the marketplace from a loss severity standpoint.
AM Best identified improved underwriting performance as a positive factor for the market. Although pricing declines continued, the rate of decrease has slowed, which may support premium adequacy.
Insurers have also applied more caution in coverage and capacity decisions, reflecting adjustments based on experience from previous soft-market periods.
However, AM Best maintains a negative outlook for the segment due to rising legal expenses and growing exposures tied to technological risks and pricing trends that may not be sustainable.
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.
According to D&O Insurance Insights, recognition of insurers’ reserve redundancies from the most recent accident years may support near-term underwriting results.
Year-to date D&O direct written premiums fell by 11% yoy, and direct earned premiums declined by 9%, based on property/casualty industry aggregate statutory results.
Loss ratios are expected to worsen, as heightened competition has reversed resulting in lower renewal rates. However, the segment direct loss ratio of 53.8% for 2024 was relatively unchanged from 53.6% for 2023
