Best’s Commentary: US Directors and Officers Liability Writers Prioritize Long-Term Profitably Amid Competition and Emerging Risks

OLDWICK, N.J.--(BUSINESS WIRE)--While the U.S. directors and officers (D&O) liability insurance segment has reaped the collective benefit of tighter risk selection, more disciplined underwriting and moderating premium decreases in recent years, competitive market conditions and an evolving liability risk landscape moving forward may constrain near-term profit margins, according to a new AM Best report.

AM Best recently revised its market segment outlook for the D&O sector to stable from negative, noting rate stabilization and improving loss ratios, among other factors. Now a newly issued Best’s Commentary cites possible headwinds, including a potential increase in corporate initial public offerings and a capacity surplus, which indicates that pricing competition will remain intense. “The expansion of liability risks makes it imperative that account underwriting and pricing effectively consider these new factors,” said David Blades, associate director, AM Best.

The D&O liability insurance market remained competitive as 2025 concluded, although some market observers described the abundant capacity as more constrained. This would indicate more muted year-over-year premium decreases for individual accounts given a risk environment that is more suitable for modest downward premium adjustments. Recently issued pricing survey data from the Council of Insurance Agents and Brokers stated that average rate decreases on medium and large-size accounts with favorable risk profiles ranged from 2.1% to 3.8%.

“Quarterly pricing and premium trends through 2026 will provide more definitive indications of whether the market softening momentum will level off,” said Christopher Graham, senior industry analyst, AM Best.

Monoline D&O insurers have reported favorable results over the past few years, which continued through the third quarter of 2025. While the direct incurred loss ratio through that most recent period was five percentage points higher than in 2024, it was still eight points better than the loss ratio at the deepest point of the prolonged soft market for this business line in 2018.

Among the key trends affecting D&O liability insurers that AM Best will continue monitoring and assessing are:

• The recent decline in regulatory enforcement activity, which signals a pivotal transformation in the regulatory landscape as the Securities and Exchange Commission shifts its focus to more traditional fraud and investor protection priorities.
• Potential adverse prior accident year loss reserve development for the other liability (claims-made) line of business, which encompasses most professional liability business, particularly open claims from the years at the end of the last decade when D&O pricing, on average, was inadequate for the risks being covered.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=362861.

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.

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