D&O Liability Market Finds Stability as Downward Pricing Pressures Ease: AM Best

The directors and officers liability insurance market is stabilizing following an extended period of intense price competition and declining premiums, according to AM Best’s market outlook.

After years of downward pricing pressure fueled by new market entrants and surplus capacity, D&O renewal rates are moderating, AM Best said, revising its market outlook to stable from negative. D&O premium reductions are expected to remain modest through 2026, with flat renewals becoming increasingly common as pricing appears to approach its floor. This represents a marked shift from the aggressive competition that has characterized the past several years, the rating agency noted.

D&O insurers are demonstrating heightened discipline in their approach to underwriting. Rather than chasing premium volume, carriers are implementing stricter risk selection criteria, raising deductibles, and conducting deeper scrutiny of corporate financial health and governance practices, AM Best said.

The shift extends to regulatory priorities as well. Enforcement activities declined to their lowest levels in a decade during 2025, as the Securities and Exchange Commission refocused on traditional fraud and investor protection matters. This transition has created a more favorable environment for corporate executives and their companies, reducing potential liabilities.

Profitability Pressures Amid Emerging Complexity

Despite tighter underwriting practices, D&O carriers are grappling with contradictory market forces, AM Best said. Loss ratios remain favorable — the 2024 direct incurred loss ratio represents one of the best results in over a decade — yet rising claim severity continues to erode profitability.

Average settlements in securities class action lawsuits climbed to $56 million in 2025, up from the inflation-adjusted average of $44 million the prior year.

New and evolving risks are adding complexity to underwriting decisions, the report said. Cyber incidents, particularly ransomware attacks and operational outages, are driving an increasing portion of D&O claims. Anticipated increases in global insolvencies during 2026 could trigger litigation alleging fiduciary negligence.

Geopolitical tensions, trade disruptions, and emerging artificial intelligence applications have also begun appearing in litigation, with approximately a dozen AI-related class action lawsuits filed in the first half of 2025 alone, the report noted.

Meanwhile, abundant industry capacity continues fueling competitive pressure. According to Elizabeth Blamble, senior financial analyst at AM Best, “This cautious approach likely will result in heightened pressure for rate corrections, especially within the excess layers.” She noted that marginal shifts in loss ratios and premium volumes suggest potential margin tightening that warrants close monitoring.

The market’s longer term trajectory remains uncertain as established carriers adopt more selective underwriting postures while newer market participants seek to grow their premium bases.

“What is unknown is how newer D&O underwriters seeking to grow market share will react to established carriers being more selective and conservative with their pricing,” Blamble said.

Obtain the full report here. &