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Management Liability

D&O liability 2025 outlook for public companies

The Baldwin Group
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Updated: February 4, 2025
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3 minute read

Overview

Through 2024, the public D&O market remained highly competitive, with rate reductions still widely available for most insureds. That said, most public company clients experienced more muted rate decreases after consecutive years of meaningful premium cuts, especially in the second half of 2024 and approaching year-end.

We continue to believe that soft market conditions are primarily driven by an exaggerated supply/demand imbalance across the marketplace. While the supply side remains high due to both existing and new market entrants eager to compete on fresh opportunities, we anticipate that an expected increase in demand for 2025 may bring some stability to the current rate environment.

Marketplace trends

Pricing

Both newly public (within the past three years) and existing public company insureds continued to secure premium reductions across their D&O programs, of varying magnitude. Rate decreases for newly public companies continued to outpace those available for existing public firms based on higher premiums typically associated with IPO business. Nevertheless, existing public company renewals still experienced meaningful premium cuts throughout the year, usually north of 15 percent.

Looking into 2025, we expect some deceleration in rate decreases for most insureds. While decreases will remain available, we anticipate insurers will take a more cautious approach across D&O business as they assess overall portfolios following two years of aggressive rate reductions. An uptick in capital markets activity may also serve to reduce competition on renewal business, where rates are approaching pre-hard market levels.

Capacity

Insurance capacity remains readily available across the D&O space, with slower capital markets activity through 2024 limiting new public company business for insurers. While some insurers have exited the marketplace or begun to pare back public D&O exposure, certain others have entered (or re-entered) the marketplace seeking to grow. Absent significant new claims activity or severe adverse developments across existing claims, we anticipate D&O capacity to remain stable and abundant.

Current strong economic conditions and investor sentiment are bullish for a meaningful uptick in IPO activity for 2025. Should this come to fruition, we expect many insurance carriers will look to deploy their capital on this new business, typically associated with higher premiums and self-insured retentions.

What to expect for 2025

Overall, it is anticipated that 2025 will be another positive year for most insureds, with premium decreases still available for those with favorable risk profiles. However, this will likely be to a lesser degree than in the past two renewal cycles. Insureds seeking to drive more material premium savings may need to consider shifting primary layers away from established insurers and partnerships. Instead, they could consider newer, more aggressive market entrants, who may have limited data available regarding claims-paying history and general market behavior.

2025 D&O underwriter survey highlights

We surveyed over 100 public company underwriters across the United States and London for their expectations on pricing, capacity, and areas of concern heading into 2025.

  • The industry heat map represents a weighted average of underwriter concern by industry: SPACs, Educational, and FI-Banks, all with noteworthy year-over-year increases in concern.
  • 73 percent of underwriters indicated that they expect 2025 primary rates to be +/- 5 percent.
  • Securities claims lead the list of public underwriters’ concerns, ahead of bankruptcy, derivative claims, and others;
  • Several underwriters shared comments around perceived pricing inadequacy, noting the current pricing environment as unsustainable.
  • 75 percent of respondents see rates as flat or up 5 percent -10 percent for higher-concern industry groups.

Industry heat map

Boardroom hot topics for 2025

  • Artificial intelligence (AI) and generative AI
  • Cybersecurity and the SEC’s evolving cybersecurity disclosure requirements
  • Impact of the newly elected political administration on capital markets, regulations and oversight, disclosure requirements, and the geopolitical landscape

Additional insights can be found in The Baldwin Group/Nasdaq D&O Benchmarking Report which is slated to be released in early March.


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