While U.S. directors and officers (D&O) liability insurance remains profitable, premiums fell for a fourth consecutive year in 2025, reflecting increased competition in the sector as commercial insurers’ underwriting performance shows warning signs, according to a new report from AM Best.
AM Best’s segment report, “US D&O Liability – Still Profitable, But Warning Signs Are Clear,” states that direct loss rates are up 5 percentage points in 2025 compared to the previous year.
The increase may indicate that rising claims costs and related fees are beginning to outpace premium growth at the individual account level, the report said.
Another caveat is the level of reserves for the accident years 2023 and 2024, which proved insufficient in 2025. “This may indicate underlying deficiencies that could lead to a decline in D&O liability underwriting performance in the short term,” said David Blades, associate director at AM Best.
In addition, new business opportunities for D&O insurers have been limited by slowing capital market activity and created an oversupply of capacity, putting downward pressure on rates.
In addition, AM Best warns that geopolitical instability, economic volatility, complex technological advances and tight regulatory oversight are shaping an evolving risk landscape.
The report noted that these factors, coupled with the longer duration of outstanding claims caused by social inflation, have the potential to erode existing underwriting profits.
Over the past decade, collective direct premiums for single-line D&O companies peaked at nearly $15 billion in 2021 but have fallen to just over $10 billion over the past four years, according to AM Best.
AM Best senior industry analyst Christopher Graham said: “Despite strong direct underwriting performance over the past few years, the competitive D&O market is expected to become tighter by 2026 and underwriting margins are likely to shrink.”
The decline in D&O premiums in recent years is partly related to falling demand, particularly for transactional insurance. However, an increase in the number of IPOs in 2025 points to increasing demand.
The report highlights that while the industry remains profitable, the number of outstanding claims in the claims liability segment is a worrying sign.
The current proportion of outstanding claims for the accident years 2023 and 2024 is similar to that seen late in the previous decade, with poor outcomes and serious adverse developments over time.
