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Tim Fletcher provides insights into the D&O risk environment and insurance market
The directors’ and officers’ (D&O) liability insurance market remains dynamic, presenting both challenges and opportunities for insureds, insurers and brokerage firms. The market is still competitive, but there have are signs of rate stability for both primary and excess policies. Insurers are now prioritizing sustainable pricing, influenced by peak uncertainty highlighted by tariffs, geopolitical turmoil, interest rate fluctuations and inflation expectations, each of which impact financial results and future investment decisions. Moreover, employment trends are shifting, and supply chains are grappling with the aftermath of global trade tensions.
D&O claims from 2018, 2019, and 2020 continue to challenge insurers, and have caused some to exit the U.S. D&O market completely. Despite favorable conditions for buyers, there's an increase in securities class action claim activity, derivative demands and suits, both in frequency and severity. Shareholder activism is rising, and investigations are continuing to keep stakeholders vigilant.
IPOs and de-SPACs have seen elevated activity, and could be making a comeback in the second half of the year; it was not long ago when those claims were in the spotlight. Defense fees are climbing, and event-driven matters such as Cyber, DEI and AI washing claims continue to persist.
Federal initiatives to integrate digital assets into the U.S. economy will reshape the risk landscape, presenting challenges and opportunities for the insurance industry. Executive Orders and legislation from the first half of the year are causing insurers to navigate a rapidly evolving environment that now includes crypto-related exposures. We will continue to monitor the impact of crypto as the regulatory framework develops.
Insurers are strategically navigating pricing and questioning existing risk management practices to ensure that they meet changing risk conditions. Focus remains on governance, compliance, financial reporting and culture. For insurance buyers, staying informed and prepared is crucial for managing the risks and opportunities in the D&O insurance market.
If you have any questions about your coverage or are interested in obtaining coverage, please contact your Aon broker.
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