D&O Insurers See Best Loss Ratio in Years Amid Evolving Risks

US directors and officers (D&O) liability insurers reported their most favorable loss experience in more than a decade in 2024, according to a report from AM Best, despite shrinking premiums and ongoing underwriting challenges.

The report, titled Changing Environment Brings New Risks to D&O Insurers, attributed the improved performance to substantial reserve takedowns from prior accident years and the effects of stricter underwriting practices and higher rates established during the hard market of 2020–2021. These actions contributed to the lowest quarterly loss ratio in 7 years during the fourth quarter of 2024 and bolstered full-year financial results.

"Market uncertainty, evolving technology, corporate disclosure related issues, and potential macroeconomic strife stemming from new tariffs are among the factors affecting the D&O segment," David Blades, associate director, industry research and analytics at AM Best, said.

AM Best's analysis, based on monoline D&O liability filings from US insurers, showed a notable decline in the direct loss ratio—more than 10 percentage points from the segment's 11-year peak of 62.4 in 2017 and 2018. Despite this, the report warned that challenges persist, particularly from open claims originating in the soft-market period of 2016–2019, which developed adversely in 2024 and may continue to pressure results.

The report also highlighted the increasing complexity of risks faced by corporate executives, including the expanding role of artificial intelligence, macroeconomic volatility, cyber exposures, and changes in the legal and regulatory environment.

Although the industry's total D&O premiums dropped 6.0 percent year over year in 2024, most of that decline occurred in the first quarter, when premiums totaled $2.2 billion—the lowest in 4 years. Each subsequent quarter in 2024 saw increases in direct premiums written, reversing some of the early-year declines. The surge in fourth-quarter premiums, combined with reserve releases, drove a sharp improvement in the segment's loss ratio.

"The loss ratio for the fourth quarter of 2024 was the lowest quarterly loss ratio of the past 7 years by a wide margin, 7 points better than for any other quarter," Christopher Graham, senior industry research analyst at AM Best, said.

While recent underwriting profits are positive, AM Best cautioned that ongoing profitability could result in further pricing pressure, particularly if insurers refrain from raising rates and risk losing profitable accounts.

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