Multiple global forces are rewriting D&O risk, from political, economic, and social volatility to AI-related liabilities.
Corporate directors and officers are operating in a more complex environment than at any point in the past decade, and their insurers are working to keep up.
“Coverage is broadening,” says Mark Sutton, senior equity partner at Clyde & Co., a global law firm headquartered in London and known for its deep specialization in insurance, risk, and regulatory matters. “We’re slowly seeing D&O policies evolve to reflect a more complex regulatory environment, and underwriting discipline is tightening.”
Regulators, meanwhile, are stepping up their pursuit of corporate misconduct. Personal exposure for directors and officers has widened and, with rising legal costs and collective actions, D&O premiums are nudging upward. In some regions, the long trend of price decline shows signs of flattening, or in some instances even reversing.
Regulatory pressures will vary across regions. For example, in the UK, scrutiny of ESG and AI disclosures is intensifying, and in the US, enforcement actions by the US Securities and Exchange Commission are on the rise.
But board‑level exposure is also being reshaped by geopolitical turbulence, economic uncertainty, and the growing influence of new technologies, says Jarrod Schlesinger, global head of Financial Lines and Cyber at Allianz Commercial. Geopolitics has become a core focus for boards and executive leadership teams worldwide.
“Political, economic, and social volatility across regions is affecting supply chains, capital flows, regulatory regimes, and operational continuity,” says Schlesinger. “Armed conflicts, sanctions, cyberattacks, and trade disputes are now routine considerations for multinational companies.” Heightened volatility leaves companies and their leaders exposed to a variety of operational, financial, and reputational threats, many of which could trigger litigation.
Europe: Intensifying Scrutiny
This dynamic is especially pronounced in Europe, says Schlesinger, as companies navigate risks tied to international sanctions and politically unstable regions: “Geopolitical instability is also amplifying cross‑border compliance exposure and driving significant D&O losses, particularly in Europe and the UK.”
Corporate insolvencies—a major driver of D&O claims, particularly for private companies—are set to rise again in 2025 and 2026. According to Allianz Trade, global business insolvencies rose 10% in 2024, ending the year 12% above pre‑pandemic levels. Allianz Trade’s Global Insolvency Report, published last month, estimates they climbed a further 6% in 2025 and forecasts a 5% increase in 2026, marking a fifth consecutive year of increases.
“Financial distress typically intensifies scrutiny of board decision‑making and capital allocation,” says Schlesinger.
Shareholder activism is also reshaping the D&O landscape, he adds, as “derivative litigation” expands both in frequency and severity. Such actions now number in the dozens each year, he says, and often track securities class actions alleging breaches of fiduciary duty. Beyond traditional accounting‑related disputes, he points to the rise of event‑driven claims, with M&A activity, regulatory enforcement, workplace and consumer issues, and other operational shocks increasingly acting as triggers for D&O suits.
Another factor impacting D&O insurance in Europe is the evolving landscape of ESG-related liabilities.
As more countries introduce ESG reporting mandates, directors and officers are increasingly exposed to the costs associated with investigations, enforcement actions, and potential fines for non-disclosure or misrepresentation. The regulatory pressure can lead to claims from private litigants dissatisfied with disclosures regarding a company’s ESG commitments.
“Expanding disclosure and reporting regimes—particularly in Europe and other major markets—are elevating expectations around transparency, climate strategy, supply chain oversight, human rights, and workforce governance,” Schlesinger says. “ESG considerations are increasingly systemic, intersecting with enterprise risk management, capital strategy, and stakeholder engagement.”
Non-accounting securities class actions have more than doubled over the past decade, he adds, and environmental and product-related controversies, including emerging risks tied to “forever chemicals,” have produced costly litigation and substantial settlements.
AI Risk Arrives
Against this backdrop, another major emerging exposure is the widening gap between what companies claim about their AI capabilities and what they are implementing, a misalignment that can spur regulatory scrutiny, securities litigation, and shareholder actions.
“Boards are increasingly accountable for a widening set of AI‑related risks,” says Beena Ammanath, executive director of the Global Deloitte AI Institute, “from model inaccuracies and hallucinations to IP leakage, privacy breaches, bias, ethical lapses, and cybersecurity exposure: all of which carry growing legal and regulatory consequences.” With weak governance, she warns, these issues can “quickly lead to reputational damage.”
Scrutiny is now extending to another fast‑emerging hazard, Ammanath adds: AI‑washing, where companies misrepresent their use of AI to appear more advanced or innovative than they are. This often takes the form of vague “AI‑powered” claims without evidence, inflated descriptions of automation or risk controls, or the masking of manual processes behind the language of machine intelligence.
“We’re seeing an uptick in scrutiny in this area,” Ammanath says. “As a result, many executives and their boards are pushing harder for stronger governance, testing, and human oversight.”
How Companies Are Limiting Risk
Clyde & Co.
As the risk environment grows more complex, boards are increasingly compelled to reevaluate the scope and substance of directors’ and officers’ obligations.
“Boards are strengthening governance and improving disclosure practices while also investing in more robust risk oversight,” says Sutton. “This is particularly the case with ESG and technology.” Many are enhancing their scenario planning and crisis response capabilities to manage regulatory and geopolitical shocks.
Insurers, for their part, are collaborating more closely with clients to improve transparency, refine risk controls, and tailor coverage to emerging exposures, Sutton adds, with the emphasis shifting toward proactive risk management.
Given the increasingly complex global risk landscape, Schlesinger urges companies to “further integrate geopolitical intelligence and business‑impact analysis into their broader risk management, strategic decision‑making, supply‑chain resilience, and cyber security frameworks.” To this end, he recommends that corporate risk managers work closely with their insurance partners to identify and mitigate their risk exposures.
“It’s important to maintain open communication with internal and external stakeholders to navigate these complex and evolving risks effectively,” he says. Furthermore, with litigation, financial penalties, and reputational damage all potentially resulting from AI strategy, “businesses should consider proceeding deliberately, especially with regard to decision-making and disclosure.”
When it comes to AI accountability, Ammanath says, companies can reduce risk to boards and officers by establishing a formal AI governance program that provides clear board oversight and defined accountability across the AI lifecycle. “They can also embed responsible AI practices into processes and training as well as model risk management that includes risk assessments, validation, and continuous monitoring.”
Taken together, these primary forces are reshaping both the expectations corporate leaders face and the liabilities that follow. Boards are being asked to demonstrate sharper judgment, stronger governance, and more credible oversight at a time when regulators, investors, and insurers are scrutinizing decisions with unprecedented intensity.
Regulatory investigations and claims activity continue to rise across major markets, adding further pressure to a sector where years of premium declines are now flattening out and, in some regions, have begun to reverse. D&O insurers, for their part, are tightening underwriting discipline, engaging more deeply with clients to improve transparency and risk controls, and tailoring coverage to emerging exposures.