While US Director & Officers’ (D&O) liability insurance remains profitable, premiums 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 AM Best’s Market Segment Report, “US D&O Liability – Still Profitable But Warning Signs Are Evident,” notes a rise of five percentage points in the direct loss ratio of 2025 compared to the previous year.
This increase, according to the report, may indicate that escalating claim costs and related expenses are starting to exceed premium growth on an individual account level.
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.
Additionally, D&O insurance companies’ new business opportunities have been limited by slower capital market activity, and created an excess supply of capacity, putting downward pressure on rates.
Furthermore, AM Best warns that evolving risk landscapes are being shaped by geopolitical instability, economic volatility, intricate technological advancements, and intense regulatory oversight.
These factors, combined with the prolonged duration of open claims caused by social inflation, threaten to erode existing underwriting margins, states the report.
According to AM Best, 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 is linked, in part, 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.
Though the sector remains profitable, the number of outstanding claims within the claims-made liability segment indicates cause for concern, the report highlighted.
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.
