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Digital EditionRising D&O Exposures as Geopolitical Shifts, Cyber Threats and AI Reshape Risk Landscape
Directors and officers face mounting liability from an expanding risk landscape where geopolitical uncertainty, cyber incidents and emerging threats like artificial intelligence increase the threat of litigation by shareholders, according to Allianz Commercial’s Directors and Officers Insurance Insights 2026.
The liability environment for corporate leadership is intensifying across multiple fronts, according to the report. While the number of U.S. securities class action filings remain steady at around 229 cases annually, the financial impact has grown substantially: the average size of U.S. securities class action settlements increased 27% to $56 million in the first half of 2025.
More concerning for boards: shareholder derivative litigation — where investors sue directors on behalf of the company — has surged, with 13 of the 18 shareholder derivative settlements exceeding $100 million occurring in just the past five years.
Non-accounting and event-driven claims now dominate the D&O landscape, Allianz Commercial said. The frequency of non-accounting securities class actions has more than doubled over the past decade, driven by issues ranging from mergers and acquisitions to regulatory enforcement actions. Political and social shifts have emerged as particularly volatile sources of liability, with the evolving tariff environment and changing regulatory approaches to diversity, equity and inclusion triggering enforcement actions and shareholder lawsuits throughout 2025.
Meanwhile, business insolvencies — a key driver of D&O liability, especially for private companies — are projected to rise 6% in 2025 and 5% in 2026, marking five consecutive years of increases and reaching 24% above pre-pandemic averages. The first half of 2025 saw 17 mega bankruptcies involving companies with over $1 billion in reported assets, the highest number for any half-year period since the COVID-19 pandemic.
Cyber and AI Push Directors Into Uncharted Territory
Technology-related risks have become a major frequency driver of D&O claims, according to Allianz Commercial. Ransomware attacks accounted for approximately 60% of the value of large cyber insurance claims during the first six months of 2025. More troubling for directors: claims increasingly arise not from direct attacks, but from perceived failures in cybersecurity oversight and preparedness, the report noted.
“More and more we see companies and their investors holding board members responsible for cyber incidents,” said Alfred Mora, chief underwriter for financial lines in Germany and Switzerland at Allianz Commercial. “The willingness to seek damages in court is increasing, partly out of fear of recourse claims by shareholders or supervisory authorities.”
Artificial intelligence represents the next frontier, the report said. There have been 53 AI-related securities class action lawsuits filed since March 2020, with 12 filed in the first half of 2025 alone. Many cases allege that management overstated AI benefits to their companies – so-called “AI-washing” – or understated risks to profitability. In April 2025, for example, the U.S. Securities and Exchange Commission charged the founder and former CEO of AI startup Nate Inc. with misleading investors by misrepresenting the company’s AI capabilities.
Even seemingly peripheral issues carry significant liability potential, according to the report. Forever chemicals, or PFAS, have spawned contentious litigation, with analytics firm Verisk estimating that PFAS water contamination and environmental litigation in the U.S. could eventually cost as much as $165 billion. From a D&O perspective, securities litigation emerges when shareholders allege directors failed to identify potential PFAS liability exposures and inadequately disclosed those risks to investors.
Geopolitical Intelligence Becomes Board-Level Imperative
The volatile geopolitical landscape demands fundamental changes in how boards approach risk management. Armed conflicts reached their highest level in seven decades during 2024, with more than 110 state-based conflicts occurring globally. These tensions, combined with fluctuating tariffs, fuel economic instability and complicate operations for companies across borders.
Directors can be held accountable for misjudging geopolitical impacts on their company’s operations or failing to adapt to legal and regulatory requirements in different territories. The war in Ukraine, for instance, destabilized energy markets and drove oil and gas prices up 40% and 180% respectively in the two weeks following the invasion, triggering cascading disruptions that exposed management to potential liability for inadequate preparation or response, according to the report.
“Viewing geopolitics through a business lens allows companies to identify risks and threats before they emerge,” said Ralph Viand, product development and multinational lead for financial lines at Allianz Commercial. “Systematically monitoring emerging and active geopolitical hotspots remains a key component in the current unstable market environment.”
For companies considering reshoring or expanding their U.S. footprint to mitigate tariff exposure, the litigation risk in the U.S. requires careful analysis, Allianz Commercial said. A 2024 survey of U.S. companies with more than $1 billion in revenue revealed a 14.6% increase in spending on class actions alone, totaling $3.9 billion.
“The U.S. has the most litigious business environment in the world,” said Heather Fong, North America head of product development for financial lines at Allianz Commercial. “The very real risk of U.S. litigation may make these moves cost prohibitive.”
The path forward requires boards to fundamentally expand their approach to risk identification, according to Allianz Commercial. Traditional risk management has focused on historical, foreseeable threats, but directors are now expected to conduct horizon scanning and disclose risks that haven’t yet occurred but may emerge.
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