The directors and officers insurance market has experienced favorable results in recent years, but ongoing risks and market uncertainties could challenge sustainability.
AM Best discusses the current state of the directors and officers insurance market, highlighting recent favorable results, the need for pricing stabilization, and the evolving risks that are reshaping underwriting. Beinsure Media has selected the most important points from the report.
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.
Looking at the marketplace and looking at the fact that recent results have been very favorable, it is somewhat offset, AM Best believes, by the risks that are still prevailing and the greater uncertainty that’s going to face corporate executives.
To that extent, we’re in uncertain times, and we’ll just see how this manifests itself as we continue to go through 2025.David Blades, associate director of industry research AM Best
Underwriters in the D&O insurance sector continue to benefit from significant price hikes and refined market practices adopted between 2019 and 2021.
These adjustments drove profitability back to healthy levels, according to Fitch Ratings.
However, the market’s improved performance has spurred increased underwriting capacity and intensified price competition, a trend unlikely to reverse soon.
D&O pricing now trends contrary to most U.S. commercial lines, which still experience positive price movement, although at more moderate levels compared to prior years.
A wave of sharp premium rate increases and improvements in US market underwriting practices from 2019 to 2021 led to a significant recovery in segment performance.
Allianz Research expects global growth to slip into negative territory in Q4 of 2024 (-0.1% q/q), followed by a slow recovery at +1.5% in 2024.
