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

It looks like the market for directors and officers insurance is shifting, according to Woodruff Sawyer, with the number of renewals seeing flat or price increases for the first time in 18 months.

Though 83% of its clients continued to experience premiums relief through the second quarter 2024, Woodruff Sawyer’s D&O Looking Ahead Guide said the market appears to be “in another state of transition.” Nearly all—97%—saw premium decreases for D&O coverage during 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. Still, companies have the opportunity to align coverage with their risk tolerance, especially for companies that had taken on more risk during a harder market.

For 2025, new insurers to D&O will take more risk for market share, but more seasoned carriers will “defend their turf,” the broker said. Public companies “will continue to have an option for D&O-program cost savings—but more likely from new market entrants than their incumbent insurance carriers,” the firm added.

“Established carriers will work hard to keep rates at what they deem reasonable to avoid the dynamic of underpricing today only to then be forced into hard market pricing or leaving the D&O market altogether.”

Turning to trends that can affect the marketplace, Woodruff Sawyer said it had no good news when looking at the D&O litigation landscape. Securities class action (SCA) lawsuits are on the rise, with the plaintiffs’ bar on track to file more suits than last year even as IPO- and SPAC-activity waned. Plaintiffs have focused on companied with a market capitalization of $2 billion or less, and continue to have eyes on technology and biotechnology companies.

The broker also noted SCA settlement amounts during the first half of 2024 were $2.1 billion—on par with the record-setting settlements during the same time in 2023. Furthermore, the plaintiffs have scored some big wins with derivative lawsuit settlements in the banking, airline, 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 well be seeping into the cracks” even if a certain company is not AI-focused.

“AI may be increasingly embedded in software services your company is using,” the form explained. “You don’t have to be a techno-pessimist to be concerned about programs going rogue. The board’s oversight role is more important than ever.”