State of the Insurance Market:
2025 Outlook

Management Liability

Litigation against corporate leaders was common throughout 2024 and continues into 2025, driving greater demand for strong directors and officers (D&O) coverage.

Businesses and executives need more comprehensive protection now due to:

  • Regulatory scrutiny
  • High-interest rate environment
  • Political/economic uncertainty amidst a new administration and shareholder activism
  • Securities class action lawsuits leveled off after a three-year period of decline
  • Emerging risks like cyber incidents
  • Intensified environmental issues
  • Increased bankruptcy filings
  • Banking industry turbulence

Additionally, the Securities and Exchange Commission (SEC) introduced new regulations affecting the financial market and burdening companies and their directors and officers with the cost of compliance. The commission is focusing particularly on D&O and the management of large debt, which could lead to bankruptcies that impact local and global market volatility.

Market Conditions

 

Securities class-action lawsuits have flattened after a period of decline. In 2024, average securities class action settlement values were $43M, and the median settlement value was $14M for publicly traded companies. Defense costs continued to increase, and in 2024 they made up 27.4% of the settlement values. As a result, certain underwriting standards tightened, leading to higher premium rates for higher-risk companies. Companies in the financial institutions, real estate, communications/services, healthcare, telecommunication and technology sectors saw a significant increase in securities class action lawsuits.

Coverage Considerations

 

The management liability insurance market remains soft, as we are now in the fourth year of a soft market. Nevertheless, there’s been a deceleration of rate decreases. Still, this market provides a favorable period for coverage renewal or purchase, as new market entrants continue to drive down rates and expand coverage terms. This, coupled with more traditional carriers focusing on retaining renewals they deem profitable, creates a buyer’s market.

With a new presidential administration focused on de-regulation, pay special attention to new SEC regulations for the balance of 2025, and what areas (Crypto and Bitcoin) will have less regulatory oversight. This will affect management liability and cyber insurance. By focusing on compliance, companies can avoid legal and financial ramifications.

For the past five years, the government has focused on environmental, social, and governance (ESG) practices. During this time, insurers more heavily scrutinized companies' risk management practices and governance structures before extending coverage. The new administration has rolled back some ESG and diversity, equity, and inclusion (DE&I) initiatives, and some private companies have followed suit. Continue to review policies, identify conflicts of interest, and ensure transparent disclosure to stay abreast of regulatory challenges.

Business leaders need to monitor the fast-changing landscape of cryptocurrency and digital assets. Regularly evaluate these assets through the lens of both cyber and management liability — especially when engaging with third-party providers.

Management Liability Rate Forecast

 
Rate Forecast
Private company - Primary -5% to -15%
Private company - Excess -10% to -30%
Public company - Primary   -10% to Flat
Public company - Excess -10% to -30%
Financial institutions - Primary   -5% to Flat
Financial Institutions - Excess -5% to -15%
Employment Practices - Primary   -10% to Flat
Employment Practices - Excess -10% to -20%
Fiduciary liability - Primary   -10% to Flat
Fiduciary liability - Excess -10% to -20%

Recommendations

 
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Understand insurance requirements: Regularly assess risks and maintain open and transparent communication with insurers and brokers. Doing so will stave off potential issues.

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Leverage favorable market conditions with stable rates and increased capacity: Consider adding additional limits to your coverage or diversifying your insurance carriers. These moves can provide added protection in case of unexpected cyber threats or management liability issues.

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Adhere to regulations: Prioritize compliance with new SEC regulations, especially regarding cybersecurity disclosures and fair valuation practices. Investing in robust risk management strategies and controls can lead to better insurance terms and conditions.

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Fortify cyber protection: Small and mid-market companies are prime targets for cyberattacks, because criminals assume these organizations have fewer cyber controls. Bolster cybersecurity measures to help defend against threat actors.

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Stay informed of industry trends: Being vigilant of emerging risks and regulatory changes allows informed decision-making about insurance coverage and risk management strategies.

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Management Liability Practice

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Risk Strategies Management Liability Practice provides protection, solutions, and services to protect against Directors & Officers (D&O) liability, fiduciary liability, crime and fidelity, and employment practices.

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The contents of this report are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.