While these developments are positive for the crypto ecosystem, most traditional insurers remain hesitant to participate until clear regulatory guidelines are in place. Insurance options remain limited, with a small number of specialized insurers underwriting the majority of policies. Additionally, policy terms and conditions are generally more restrictive than those available to businesses in traditional industries.
The crypto industry is rapidly expanding, with numerous newly established digital asset managers and crypto-related companies seeking comprehensive insurance solutions. Clients are rounding out their insurance programs by purchasing additional policies, including cyber, crime, and kidnap and ransom insurance. As the number of policyholders and policies purchased increases, premiums may soften, and more favorable terms and conditions will become available.
Management Liability Update
- Securities class action trends: Securities class actions represent the most significant severity risk for public company D&O insurers; therefore, underwriters closely watch these filings as an indicator of their loss experience and profitability. According to NERA, the number of federal court securities class action lawsuit filings in 2024 was 229, significantly elevated from 206 in 2022 and 212 in 2021. In addition, in 2024 the average settlement value was $43M, although slightly below the 2023 inflation-adjusted average settlement value of $46M, this was significantly elevated from prior years from 2019-2021.
- Initial public offering (IPO) outlook: After three years of constrained IPO activity relative to historical averages, the IPO outlook in 2025 continues to be challenging given the current market volatility caused by the announced U.S. tariffs. As of April 2025, companies that were close to filing IPOs or launching roadshows are taking a wait-and-see approach and delaying their IPO until market conditions improve. IPO activity will likely focus on high-quality companies in sectors less affected by trade policy and where peer valuations remain strong. Companies that were planning IPOs will likely need to adjust their multiples and valuations to be attractive to investors in this current market environment.
Insurer Capacity/Trends
- There are opportunities for cost savings from newer market entrants who are looking to build market share. Established carriers are more likely to maintain rates where they feel they can maintain profitability.
- Competition amongst primary capacity providers continues to be strong — especially for those companies with strong financial performance and favorable loss history.
- Excess capacity remains plentiful. Many Insureds are taking advantage of lower excess rates to increase their policy limits year over year.
- Insurers are increasingly using data analytics and AI, enabling them to better assess and price risk and to tailor their offerings.
- Consider carrier multi-year deals with annual installments and refreshed annual aggregate limits, allowing clients to lock in rates and avoid lengthy underwriting and renewal processes.
- D&O insurers are increasing the number of ancillary lines they offer, such as crime, employment practices liability, and fiduciary liability, as they look to generate additional income and secure lines on the D&O program.
- Firms with crypto, cannabis, alcohol, and firearms exposures will continue to have a limited number of insurers willing to entertain the risk.
Representations and Warranties Update
The representations and warranties (R&W) market has been a roller coaster ride. By the end of 2021, the premium rate hit its high, and capacity was limited amidst heavy M&A activity. Fast forward to 2023, and rates came down substantially due to more R&W capacity as well as the underwriting teams expanding headcount. For the first three quarters of 2024, rates remained lower. However, in the fourth quarter of 2024, carriers were divided on rates. The larger and more mature carriers began to increase their rates above 3% rate on line (ROL) due to the increase in claim payments. The smaller and newer players have maintained the lower ROL (2.5% or less) from 2023 and 2024. It remains to be seen if the larger players succumb to the pressure of their competitors and bring down their pricing or if they are willing to give up market share to maintain what they believe is a reasonable premium level to offset losses. The aforementioned will depend on if M&A activity picks up in 2025 from its anemic pace of 2023 and 2024. The consensus of the experts at the end of 2024 was M&A would pick up substantially in 2025, but at this point that prediction has not come to fruition.
