D&O Market in ‘Transition’ on Litigation Trends: Woodruff Sawyer

The directors and officers insurance market appears to be changing, according to Woodruff Sawyer, with the number of renewals seeing fixed or price increases for the first time in 18 months.

Although 83% of its clients continued to experience reduced premiums through the second quarter of 2024, Woodruff Sawyer’s D&O Guide Looking Ahead said the market appears to be “in another state of transition.” Almost all — 97% — saw premium declines for D&O coverage in the last six months of 2023.

The market remains soft, but the pace of rate declines has slowed for both newer and established public companies. However, companies have the ability to align coverage with their risk tolerance, especially for companies that have taken on more risk in a more challenging market.

For 2025, new D&O insurers will take more risks for market share, but more experienced carriers will “defend their ground,” the broker said. Public companies “will continue to have an option for D&O program cost savings, but more likely from new entrants than incumbents,” the firm added.

“Incumbent carriers will work hard to keep rates at what they think is reasonable to avoid today’s underpricing dynamics, only to then be forced to set strict market prices or exit the D&O market altogether.”

Turning to trends that may affect the market, Woodruff Sawyer said he doesn’t have good news when looking at the D&O litigation landscape. Securities class action lawsuits (SCAs) are on the rise, with the plaintiff bar on track to file more lawsuits than last year, even as IPO and SPAC activity has declined. The plaintiffs have focused on companies with a market capitalization of $2 billion or less, and continue to have an eye on technology and biotech companies.

The broker also noted that SCA settlement amounts in the first half of 2024 were $2.1 billion, on par with record settlements for the same time in 2023. In addition, plaintiffs made some big wins with lawsuit settlements derivatives in banking and airline companies. , and pharmaceutical industries.

On the topic of artificial intelligence (AI), Woodruff Sawyer said the “hype” may have died down in 2024 compared to 2023, but AI “may very well seep through the cracks,” even if a particular company is not focused on AI.

“AI can be increasingly integrated into the software services your company uses,” the form explained. “You don’t have to be a techno-pessimist to be worried about programs going rogue. The board’s oversight role is more important than ever.”

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