D&O Insurers Focus on Profitability as Risks and Competition Shift

US directors and officers (D&O) liability insurers are emphasizing long-term profitability as competition and evolving liability exposures reshape the market, according to a new AM Best commentary.

AM Best recently revised its outlook for the D&O market segment to stable from negative, citing improving loss ratios, tighter underwriting standards, and signs of rate stabilization. Still, the report warns that competitive pressures and emerging risks could limit profit margins in the near term.

Possible headwinds include a potential increase in corporate initial public offerings and a surplus of market capacity, both of which could intensify pricing competition. "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.

Competitive conditions persisted as 2025 ended, though some market observers reported that capacity appeared somewhat more constrained than earlier in the cycle. Even so, the overall environment suggests more modest premium declines for individual accounts, reflecting a risk landscape that supports smaller downward adjustments.

Pricing survey data from the Council of Insurance Agents and Brokers found that average rate decreases for medium and large accounts with favorable risk profiles ranged from 2.1 percent to 3.8 percent.

"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 financial results in recent years, and that performance continued through the third quarter of 2025. Although the direct incurred loss ratio during that period rose 5 percentage points compared with 2024, it remained 8 points lower than the loss ratio recorded during the deepest point of the prolonged soft market in 2018.

AM Best said it will continue to monitor several trends shaping the D&O liability market, including shifts in regulatory enforcement and potential reserve pressure from prior underwriting years.

The commentary noted a recent decline in regulatory enforcement activity as the Securities and Exchange Commission redirects attention toward traditional fraud cases and investor protection priorities, signaling a shift in the regulatory environment affecting corporate liability exposures.

Another area of concern involves the potential for adverse prior accident year reserve development within the other liability (claims-made) segment, which includes most professional liability business. According to the report, open claims from the late 2010s—when D&O pricing was often inadequate for the risks being covered—could create pressure on insurers' loss reserves.

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