US D&O Liability Coverage Trends and Insights for 2025
A recent AM Best report highlights a continuing decline in premiums from U.S. directors and officers' (D&O) liability coverage, marking the fourth consecutive year of decrease in 2025. This trend underscores increased competition within the segment and suggests potential challenges ahead for commercial lines' underwriting performance.
The report, "US D&O Liability - Still Profitable But Warning Signs Are Evident," reveals a direct loss ratio for 2025 that rose by five percentage points as compared to the previous year. This increase may be indicative of climbing claim costs and related expenses starting to exceed premium income for individual accounts. Furthermore, the reserve levels set for the accident years 2023 and 2024 were deemed insufficient in 2025. David Blades, associate director at AM Best, noted, "This might indicate an underlying deficiency that could lead to a downturn in D&O liability underwriting results over the near term.
A downturn in capital markets activity has restrained new business opportunities, contributing to overcapacity in the market and resulting in rate pressures. The evolving risk landscape in light of geopolitical, economic uncertainties, and technological advances, coupled with changing regulatory environments, is also significant. Despite achieving favorable underwriting margins recently, organizations might face challenges as social inflation prolongs claims.
Monoline D&O companies collectively saw their direct premium written peak at nearly $15 billion in 2021 but then decline over the past four years to just over $10 billion. Christopher Graham, senior industry analyst at AM Best, commented, "Despite generating solid direct underwriting results during the past few years, the competitive D&O marketplace is expected to become a little tighter in 2026, with underwriting margins likely to shrink.
The reduction in D&O premiums has been linked to a drop in demand, notably for transactional coverage. However, indicators from 2025, such as an uptick in initial public offerings, suggest an increasing demand. Despite overall profitability, the volume of open claims in the other liability—claims-made line presents a potential concern. Current claims ratios for the accident years 2023 and 2024 resemble those from late in the previous decade, which historically led to adverse outcomes.
For further details, the complete "US D&O Liability - Still Profitable But Warning Signs Are Evident" report can be accessed at AM Best’s website.