AM Best announced that it is changing the market outlook for its U.S. directors and officers (D&O) liability insurance segment to stable from negative, citing factors including rate stabilization and improvement in loss ratios.
The upgrade marks a critical moment for an industry that has faced years of volatility, falling premiums and increasing regulatory pressure.
This stability is driven by low loss ratios, tighter underwriting and reduced regulatory scrutiny, according to Best’s new market segment report, “U.S. Directors and Officers Liability Insurance.”
A combination of factors has improved the underwriting environment, supporting the transition to a stable outlook.
AM Best said: “After years of premium declines, with the number of initial public offerings (IPOs) and special purpose acquisition companies (SPACs) declining each year, declining securities class action filings, and ample capacity from new market entrants, rate declines have slowed, with many renewals shifting to flat or moderate adjustments.”
noted: “Additionally, D&O carriers have maintained good loss ratios, with direct loss ratios in 2024 among the best results in more than a decade. Based on results for the first nine months of 2025, AM Best expects loss ratios to worsen slightly throughout the calendar year.”
The report notes that D&O insurers are more cautious about the risks they underwrite.
As a result, underwriters are now more focused on assessing the financial stability and governance practices of companies they consider underwriting.
AM Best senior financial analyst Elizabeth Blamble said: “This cautious approach is likely to lead to increased pressure for interest rate adjustments, especially within the excess layer. Marginal changes in loss ratios and annualized direct premiums also indicate possible margin tightening and are worth watching in the coming months.”
“What remains unclear is how new D&O underwriters seeking to expand market share will respond to established carriers becoming more selective and conservative in pricing.”
According to the report, underwriters are increasingly concerned that excess tier pricing could fall below the minimum rates per million required for technical adequacy.
Furthermore, although claim frequency has declined, claim severity remains high. “Mega-settlements” remain a major issue, driven by social inflation and the prevalence of third-party litigation funding.
In addition, technological changes including artificial intelligence, the rise of cyber incidents, and geopolitical, economic and environmental factors are changing markets and creating risks for D&O writers.