Premium generated from U.S. directors and officers’ (D&O) liability coverage declined for a fourth straight year in 2025, reflecting heightened competition in the segment as warning signs loom over commercial line’s underwriting performance, according to a new AM Best report.
The Best’s Market Segment Report, titled “US D&O Liability – Still Profitable But Warning Signs Are Evident,” cites a 2025 direct loss ratio that was five percentage points higher than the prior year. According to the report, this could possibly reflect rising claim costs and associated expenses beginning to outpace premiums on an individual account basis. Another note of caution is the reserve levels for the 2023 and 2024 accident years, which proved to be inadequate in 2025. “This might indicate an underlying deficiency that could lead to a downturn in D&O liability underwriting results over the near term,” said David Blades, associate director, AM Best.
Slower capital markets activity in recent years has limited new business opportunities for D&O insurance companies and created an excess supply of capacity, putting downward pressure on rates. Risk profiles also continue to shift amid geopolitical and economic uncertainties, complex technology and regulatory scrutiny. In addition, favorable underwriting margins may dissipate as claims remain open longer, owing to the negative impact of social inflation.
According to the report, during the past decade, collective direct premium written among monoline D&O companies peaked in 2021 at nearly $15 billion, but has now fallen during the past four years to just over $10 billion. “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,” said Christopher Graham, senior industry analyst, AM Best.
The decline in D&O premiums in recent years has been partially attributable to decreased demand, particularly for transactional coverage. However, 2025 provided an indication of increasing demand in the form of a higher number of initial public offerings. While the overall results have been profitable, the open claims from the other liability – claims made line indicates cause for concern. The current ratio of open claims for accident years 2023 and 2024 is like that from the later part of the prior decade, which yielded poor results and significant adverse development over time.
To access the full copy of this Best’s Market Segment Report, titled, “US D&O Liability – Still Profitable But Warning Signs Are Evident,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=365558.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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