D&O Market Expected to Tighten Under Pressure, Says AM Best

Why It Matters

Tighter D&O underwriting signals higher costs and stricter risk selection for corporate boards, reshaping insurance spend and governance strategies. Insurers must adapt to evolving technology and regulatory risks to protect profitability.

Key Takeaways

• 2025 marks fourth consecutive year of D&O premium decline
• Underwriting loss ratio rose to 54.5% in 2025
• Insurers face tighter margins as claims linger longer
• Geopolitical tensions and AI risks add underwriting uncertainty
• Companies must enhance AI disclosure to meet evolving regulations

Pulse Analysis

The directors & officers liability market has entered a contraction phase after four years of shrinking premiums, according to AM Best’s latest analysis. Although insurers have enjoyed robust direct underwriting performance and ample capacity, renewal pricing in 2025 showed only marginal improvement, and the loss ratio climbed to 54.5%, indicating that profitability is under pressure. Slower claim settlements for accident years 2023 and 2024 have further strained reserve adequacy, prompting concerns about future underwriting results.

Demand-side factors are amplifying the market squeeze. A dip in IPO activity reduced transactional risk coverage needs, and while the IPO market rebounded in 2025, lingering economic uncertainty—exacerbated by the Iran conflict—has kept demand subdued. At the same time, emerging exposures such as artificial intelligence, ESG, and DEI regulations are reshaping risk profiles. Insurers now face the dual challenge of pricing these novel risks while maintaining disciplined policy terms, as companies grapple with AI disclosure and the financial justification of AI investments.

For insurers, the outlook demands heightened diligence in segment selection and pricing discipline. The anticipated tightening in 2026 will likely translate into higher premiums and stricter underwriting criteria, especially for sectors with pronounced geopolitical or technology exposure. Corporate boards, in turn, must prioritize robust governance and transparent risk reporting to secure favorable coverage. Navigating this evolving landscape will require both insurers and insureds to align on emerging risk metrics, ensuring that D&O protection remains effective without eroding profitability.