Profitable results might create pressure to keep premium pricing unsustainably low, the report says. (Credit: Nuthawut/Adobe Stock)

Insurers providing directors and officers liability coverage had their most favorable loss experience in more than a decade in 2024 — but risks loom, according to a new AM Best report.

According to the report’s analysis, the direct loss ratio for D&O liability improved by more than 10 percentage points from the high over the last 11 years of 62.4 in 2017 and 2018.

The boost is the result of several years of significant rate and price increases as well as more conservative underwriting and policy terms & conditions.

Year-end 2024 results were also up due to significant reserve takedowns and some of the best quarterly results in the past seven years.

But the report notes that 2025 could look different. There are concerns that recent pricing reductions, which led to a decline in direct premiums written for D&O liability over the last three years, are not sustainable.

D&O liability premium was down 6% in 2024 compared to 2023, but most of that decline occurred in the first quarter. Direct premiums written increased in each following quarter. Increased premiums in the fourth quarter, along with reserve takedowns, caused a significant drop in the loss ratio.

“The loss ratio for the fourth quarter of 2024 was the lowest quarterly loss ratio of the past seven years by a wide margin, seven points better than for any other quarter,” said Christopher Graham, senior industry research analyst at AM Best, in a statement. “At the same time, continued profitable results could lead to sustained pressure on pricing if insurers have little reason to raise rates and risk losing profitable business.”

Risks are also growing more complex for corporate executives. Challenges for D&O insurers this year and into the future include:

“Market uncertainty, evolving technology, corporate disclosure related issues, and potential macroeconomic strife stemming from new tariffs are among the factors affecting D&O segment,” said David Blades, associate director, industry research and analytics, at AM Best in a statement. “Corporate executives continue to face a variety of challenges in managing complex risks amid rising uncertainty.”

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