AM Best Revises US D&O Outlook to Stable

AM Best has revised its market segment outlook for the US directors and officers (D&O) liability insurance segment to stable from negative, citing rate stabilization, improved loss ratios, and moderating premium declines.

In a Best's Market Segment Report, "US Directors and Officers Liability Insurance," AM Best said that after several years of premium decreases, pricing conditions are beginning to level out. The moderation follows a decline in securities class action filings as initial public offerings and special purpose acquisition companies have slowed, along with abundant capacity driven by new market entrants. Many renewals are now flat or reflect modest adjustments rather than the sharper rate reductions seen in prior years.

The report found that insurers have maintained favorable underwriting performance. The direct incurred loss ratio for 2024 was among the strongest results in more than a decade. However, based on results through the first 9 months of 2025, AM Best expects modest deterioration in the loss ratio for the full calendar year.

Insurers are also adopting a more cautious underwriting stance. According to the report, underwriters are placing greater emphasis on evaluating companies' financial stability and governance practices before extending coverage.

"This cautious approach likely will result in heightened pressure for rate corrections, especially within the excess layers," said Elizabeth Blamble, senior financial analyst, AM Best. "Marginal shifts in the loss ratio and annualized direct premiums also suggest a potential tightening of margins that bears watching over the next few months. What is unknown is how newer D&O underwriters seeking to grow market share will react to established insurers being more selective and conservative with their pricing."

The report also highlights a notable decline in enforcement activity, signaling a shift in the regulatory environment. As a result, many companies have experienced a reduction in potential liabilities, contributing to a more favorable climate for corporate executives.

At the same time, claims severity remains a concern. The prevalence of large "mega-settlements" continues to influence the D&O market and is expected to remain a significant factor in 2026.

AM Best added that technological developments, including artificial intelligence, as well as the rise in cyber incidents and broader geopolitical, economic, and environmental risks, are reshaping the market and presenting evolving exposures for D&O insurers.

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