Directors and Officers (D&Os) face a complex risk environment in 2025, marked by rising global insolvencies, geopolitical instability, and emerging challenges in the digital sphere.
These risks are highlighted in Allianz Commercial’s annual Directors and Officers Insurance Insights report, which outlines the evolving exposures for corporate leaders navigating an interconnected and volatile business landscape.
Vanessa Maxwell, chief underwriting officer at Allianz Commercial, noted that while the D&O insurance market remains competitive, the potential for significant losses persists.
“The global rise in business insolvencies is a particular focus of concern, with companies and leaders exposed to potential claims from lenders seeking to recover funds, or from shareholders who allege breach of fiduciary duty," said Maxwell. "At the same time, the litigation landscape and enforcement are increasingly stringent, and we are seeing regulatory bodies across the globe step up scrutiny of corporate conduct, making D&Os more vulnerable to investigations, penalties and lawsuits.”
Allianz Trade predicts a +11% increase in global business insolvencies for 2024, with major insolvency cases rising +26% year-over-year to 344 cases in the first three quarters.
Western Europe accounted for 195 cases, followed by Asia-Pacific (67 cases) and North America (66 cases). Companies in sectors such as real estate, construction, and hospitality are particularly vulnerable due to inflationary pressures and rising interest expenses.
Dan Holloway, head of Global Management Liability Commercial at Allianz Commercial, said that many businesses are struggling to service their debt, which could increase D&O claims.
“Some sectors are particularly exposed, including real estate, construction, hospitality, tourism, and businesses in ‘consumer discretionary’, or non-essential purchases,” said Holloway.
Geopolitical events, including conflicts in Ukraine and the Middle East, are contributing to supply chain disruptions, business interruptions, and legal scrutiny. Companies failing to comply with sanctions or manage risks in unstable regions face potential lawsuits and penalties.
Jarrod Schlesinger, global head of Financial Lines and Cyber at Allianz Commercial, stated that D&Os must now review geopolitical and regulatory changes more frequently. Securities class actions have increased, with cases rising +10% year-over-year in Europe and +43% in Australia.
“A once-a-year review is no longer sufficient in the volatile era businesses are now operating in. These trends are driving the need for D&O policies that are responsive to multi-jurisdictional risks and can provide local coverage for legal defence costs, settlements and other liabilities,” said Schlesinger.
The rapid adoption of artificial intelligence (AI) poses new risks, particularly in disclosure and regulation. Exaggerated claims about AI capabilities—referred to as “AI washing”—have led to securities class action lawsuits, primarily in the U.S. but with global implications for companies listed on U.S. exchanges.
Third-party litigation funding, projected to grow nearly 10% annually through 2028, is facilitating class actions and increasing settlement costs. Schlesinger observed that this trend enables aggressive litigation strategies, creating challenges for D&Os who must defend even weak claims.
As these trends unfold, how can executives prepare for heightened scrutiny and mitigate these risks? Share your thoughts in the comments below.
