D&O Insurance Market Sees Best Loss Ratio in Over a Decade Despite Premium Decline

Complex risk landscape facing corporate executives could bring new risks to D&O insurers, AM Best reports.
By: | May 27, 2025
Topics: D&O | News | Underwriting
financial results

The directors and officers (D&O) liability insurance market saw its most favorable loss ratio in 11 years during 2024 despite declining premium volume, while corporate executives and their insurers continue to face emerging risks from artificial intelligence, cyber attacks, and regulatory shifts under the Trump administration, according to a report from AM Best.

D&O liability insurers experienced improved profitability in 2024, with the direct calendar year loss ratio improving to 49.0%, more than 10 percentage points from an 11-year high of 62.4% in 2017 and 2018. This improvement came despite direct written premiums declining for the third consecutive year to $10.8 billion in 2024, down 6% from $11.5 billion in 2023, demonstrating the lingering benefits of significant rate increases and stricter underwriting standards implemented during the hard market of 2020-2021, according to AM Best.

The market showed signs of stabilization by the end of 2024, with quarterly decreases in premium volume becoming less pronounced and ending with a modestly positive fourth-quarter gain of 4.6% over Q4 2023, the report noted. The final quarter of 2024 produced the lowest quarterly loss ratio (38.7%) seen in seven years, driven by increased premiums coupled with significant reserve takedowns from prior years, according to the report.

Securities class-action lawsuits, which previously drove the worst D&O liability market hardening of the 21st century, have returned to more stable levels post-COVID, AM Best stated. While there was a slight uptick in total securities claims in 2024 to 222 from 215 in 2023, the numbers remain far below the 400+ annual filings seen during the period of 2017-2019, when the market was at its softest.

A decline in initial public offerings (IPOs) and Special Purpose Acquisition Companies (SPACs) also have significantly contributed to the reduction in D&O premium volume. According to AM Best, after a surge of IPO activity in 2020 and 2021, the market experienced a substantial drop in 2022 and 2023, with only a modest rebound in 2024 that remained below 2017-2021 levels.

Challenges Amid an Evolving Risk Landscape

Despite positive loss trends, D&O insurers face significant challenges, according to AM Best. Claims from the competitive soft market years (2015-2019) continue to develop adversely, with an additional $472 million of adverse development in 2024.

The competitive pricing environment presents another challenge for insurers, the rating agency noted. Market participants reported that by the end of 2024, D&O pricing had fallen to 2018 levels. The number of insurance groups offering primary D&O coverage jumped almost 29% to 58 carriers in 2024 [color=rgb(30, 30, 30)]from 45 carriers in 2019, creating intense competition.

Sixteen of the top 20 D&O insurance groups experienced a drop in direct premiums written in 2024, with market leader XL America cutting back its D&O premium volume by 20.4% compared with 2023, AM Best reported.

Navigating New Risk Frontiers

Corporate executives face a multitude of complex risks that could challenge D&O insurers, according to the report, including:

  • Macroeconomic Uncertainty:
    • Market volatility, inflation concerns, and tariff-related risks creating unpredictable business environments.
  • Technological Risks:
    • AI-related exposures including “AI washing,” in which companies overstate AI benefits.
    • Disclosure-related liabilities stemming from new technology implementation.
  • Cyber Security Threats:
    • Potential D&O exposure from inadequate controls or insufficient risk disclosures related to data breaches.
  • Regulatory Complexity:
    • Trump administration policy shifts affecting environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) initiatives.
    • Bidirectional litigation risks (lawsuits for both maintaining or removing climate initiatives).
    • Jurisdictional conflicts requiring careful governance balancing.
  • Financial Vulnerabilities:
    • Private company exposure to revolving debt with benchmark-tied interest rates compressing profits.

Obtain the full report here. &

The R&I Editorial Team can be reached at [email protected].

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