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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

Best’s Commentary: Premium Decline in US Directors and Officers Liability Insurance Doesn’t Necessarily Fit with Risk Environment

Two years of premium decline in the U.S. directors and officers (D&O) liability insurance line may well run counter to the persistent headwinds present in this segment, according to a new AM Best commentary.

The corporate D&O segment continues to face multiple risks including those arising from economic uncertainty including artificial intelligence, an evolving legal landscape, changing climate patterns and potentially adverse shifts in public opinion. According to the Best’s Commentary, “US D&O Market Liability Premium Declines are Likely Inconsistent With the Risk Environment,” the subsequent exposure to potential litigation contributed to the skyrocketing renewal premium increases for D&O liability insurers in 2020 and 2021. However, since 2022, new capacity, attracted by the higher rates and elevated account pricing, has entered the market.

“This has led to significant declines in pricing for D&O liability,” said David Blades, associate director, AM Best. “As we near the end of the first quarter for 2025, renewal premium has continued to fall despite some insurers acknowledging that while claims from prior years have developed in alignment with expectations in some cases, in other cases reserves have developed more adversely than anticipated.”

According to the commentary, direct monoline D&O premium written through Sept. 30, 2024, has declined on a year-over-year basis for the past 10 consecutive quarters. Yet improved underwriting performance, tighter contractual language, and more judicious risk selection among D&O monoline insurers has resulted in more favorable direct loss ratios the past few years, even as these premium levels fell. D&O underwriters are still benefiting from the significant rate and price increases and the more conservative underwriting practices that shifted the market’s dynamics during the 2019-2021 period.

Despite recently favorable statutory underwriting results, the softer pricing of the past couple of years could ultimately dampen the financial performance of D&O insurers because the premium base to support future claims activity has diminished, even as risks are emerging and expanding.

“We believe that insurer calendar-year results could soon be affected by adverse development embedded in prior accident-year incurred loss and defense and cost containment, or DCC, expense reserves, which is captured in the other liability/claims-made statutory line of business,” said Chris Graham, senior industry research analyst, AM Best.

AM Best will reassess current pricing and loss reserve trends in the D&O sector once calendar-year 2024 data has been aggregated and finalized.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=351731.

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.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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