D&O Insurance Market Conditions in 2026 – Stabilization with Emerging Pressures

The U.S. Directors and Officers (D&O) liability insurance market in 2026 is stabilizing after a period of softening. Increased capacity has kept competition strong, resulting in flat or modestly decreased premiums for many insureds. However, rising claim severity, economic challenges, and new risks are causing insurers to apply greater underwriting discipline, especially in middle and excess layers. Such stabilization is underpinned by an influx of new carriers and expanded capacity, which has intensified competition and prevented premium spikes. This competitive equilibrium is fragile, as underlying risks are evolving rapidly.

The Current Situation

Current stabilization reflects competitive pricing but growing risks. Claim severity is rising, even as frequency drops, with higher median securities class action settlements. Insurers may adjust pricing and structures, especially for higher-risk sectors. The increase in claim severity is attributed to larger settlement amounts and more complex litigation, especially in securities class actions. This trend is compounded by the growing number of "mega-bankruptcies," which not only trigger sizable D&O claims but also highlight deficiencies in governance and fiscal management. Insurers are responding by tightening terms for companies in sectors with high insolvency risk and scrutinizing board practices more closely.

More corporate bankruptcies, especially large ones, are increasing D&O claims tied to governance and financial oversight. Insurers are focusing on insureds' financial health and board practices. Strong governance and risk management help policyholders secure better terms and premiums.

New risks—like AI governance failures, cyber incidents, and tariff disclosures—are shifting underwriting focus. Insurers now assess how companies address technological and geopolitical threats, making board-level engagement and risk oversight essential. Technological and geopolitical developments are reshaping underwriting criteria. AI-related governance failures and cyber incidents are leading to increased demands for transparency and risk controls at the board level. Insurers are requesting detailed information on how companies manage these risks, and some are introducing exclusions or sublimits for cyber or AI-related events. Tariff disclosure issues, fueled by global trade tensions, are also emerging as a significant concern, with early lawsuits indicating potential for expanded liability. As a result, boards must demonstrate robust oversight and proactive risk management to secure favorable terms.

While 2026 offers buyers improved coverage, the market could tighten if losses or external shocks rise. The market's stability is susceptible to external shocks such as economic downturns, inflation, or geopolitical events. Insurers may quickly pivot to stricter underwriting and higher premiums if loss ratios increase or new risks materialize. These factors underscore the importance for risk managers to continually review and optimize their insurance programs, consider alternative coverage structures, and ensure that policy language is clear and comprehensive.

Experts Weigh In

AM Best's February 2026 report revises the U.S. D&O outlook to stable, citing moderate rate decreases, low loss ratios in 2025, stricter underwriting, and less regulatory scrutiny. Premium reductions averaged 2% or less in 2025, with flat renewals expected in 2026. Public company programs see favorable terms; private and nonprofit segments have more competition, especially in the lower layers.

WTW's February 2026 outlook calls 2026 a transitional year, with premium stabilization shifting to slight increases due to inflation, slow growth, rising unemployment, and geopolitical uncertainty. Carriers are prioritizing profitability and scrutinizing distressed or high-loss insureds.

Allianz Commercial's 2026 report notes persistent claims severity, especially in North America. Securities class action filings fell 11% to 207 in 2025, but median settlements rose 21% to $17 million. This lower frequency but higher severity pattern highlights the need for adequate limits and careful program structuring.

Market Pressures

Corporate insolvencies remain a significant market pressure. For example, Allianz projects global bankruptcies to rise 5% in 2026, 24% above pre-pandemic levels. U.S. "mega-bankruptcies" (over $1 billion in assets) spiked in 2025, especially in automotive, construction, retail, and consumer goods. Such events can result in D&O claims for fiduciary breaches and incomplete disclosures, especially for private companies.
Emerging risks like AI failures, cyber lapses, and tariff disclosure issues are affecting underwriting. Insurers seek more detail on board-level engagement at renewal, and some insurers are adding cyber exclusions or sublimits for overlapping incidents. Geopolitical and trade issues, including tariffs, add complexity, with early related lawsuits already filed.

Negotiation Opportunities

Risk managers can still negotiate broader terms while the market is buyer friendly. Key recommendations include:

  • Secure explicit coverage for entity investigative costs and regulatory inquiries.
  • Clarify interrelated claims provisions to avoid disputes, as seen in the Alexion decision.
  • Obtain clear insurance coverage for costs related to investigations and regulatory inquiries involving the company. This means ensuring your D&O policy specifically covers expenses the organization might incur if regulators or authorities launch an investigation into its activities, so those costs are reimbursed and not excluded.
  • Ensure robust Side A coverage for non-indemnifiable losses, especially in bankruptcy or regulatory matters.

Policyholders with strong financials, clean loss histories, and good governance—especially surrounding AI, cyber, and geopolitical risks—often can get better terms. High-risk sectors or those with recent claims may see tighter terms or higher retentions, or both. Negotiation strategies should focus on securing explicit coverage for investigative and regulatory costs, clarifying claims provisions, and strengthening Side A protections for non-indemnifiable losses. Companies with strong financial health, effective governance, and proactive risk management—especially regarding emerging threats—are best positioned to obtain favorable terms and lower retentions. Conversely, organizations in high-risk sectors or those with recent claims may face tougher negotiations and higher costs. Boards must engage directly in risk oversight and collaborate with risk managers to ensure insurance programs are aligned with evolving exposures and market expectations.

Conclusion

The 2026 D&O market is characterized by stable or slightly softening pricing and ample capacity, but rising severity, insolvency, and new risks mean this may not last. Proactive organizations aligning insurance and governance with emerging exposures will be best positioned for any market changes. Negotiations now focus on improved protection and clarity of coverage. Companies should review programs and engage boards to strengthen defenses.