AM Best: Outlook for US D&O Revised to Stable
•February 25, 2026
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Why It Matters
The upgraded outlook signals a more disciplined D&O market, prompting insurers to prioritize risk selection and companies to bolster disclosures, thereby influencing underwriting profitability and potential litigation exposure.
Key Takeaways
- •AM Best upgrades US D&O outlook to stable from negative.
- •Pricing pressure eases; rate declines flatten to low‑mid digits.
- •Loss ratios remain low despite slight uptick, keeping segment profitable.
- •Claim severity rises, driven by larger settlements and inflation.
- •Emerging cyber and AI risks demand stronger disclosures and risk selection.
Summary
AM Best has lifted its outlook for the United States directors and officers (D&O) liability market from negative to stable, signaling a shift after two years of aggressive pricing and a soft market.
The firm cites flattening rate declines—now expected in the low‑mid‑digit range through 2026—and abundant capacity as evidence of market stabilization. Loss ratios, which hit historic lows in 2024, remain well below the deep‑soft market levels of 2018, keeping the segment profitable despite a modest uptick in 2025.
Nevertheless, claim severity is climbing; Willis Towers Watson reported an average settlement of $56 million in the first half of 2025, roughly $12 million higher than the comparable 2024 period after inflation adjustment. Underwriters are also grappling with heightened cyber exposure, ransomware attacks, and the growing use of artificial intelligence in underwriting, which introduces new disclosure and litigation risks.
For insurers, the stable outlook encourages a tighter focus on risk selection rather than premium hunting, while corporate boards must strengthen governance disclosures around cyber, AI, and geopolitical risks to avoid costly investor lawsuits. The shift suggests a more disciplined D&O market but underscores the need for vigilance as emerging threats evolve.
Original Description
The revision for the directors and officers liability insurance segment is owed to rate stabilization, low loss ratios, tighter underwriting, and reduced regulatory scrutiny, according to new research discussed by AM Best's Elizabeth Blamble.
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