LAST year, the Directors and Officers (D&O) insurance market was ruled by uncertainty, mainly due to the impact of the Covid-19 pandemic on D&O losses.

However, in the last 12 months, the market has transformed rapidly. Insurers who were very risk-averse during the Covid-19 pandemic looked to capitalise on a very attractive rating environment, but this increased capacity added competition in the market and caused premiums to fall more rapidly than expected.

Despite the step change in premiums over the last number of years, D&O insurers have many concerns on their plate right now. Global headwinds, like inflation and the economic recession, are likely to affect the pricing, coverage and claims environment. Here we will explore how the global headwinds and evolving risk trends will likely impact the market in 2023.

Inflation drives higher claims costs

D&O is a long-tail class of business, this means it can take up to 10 years for an individual year of account to reach claim maturity. Inflation affects current insurance claims as the claims handling costs including legal fees go up, adversely impacting reserves that were set during low inflation times.

Economic recession & company insolvency

Whilst we should not draw any direct analogies between insolvency rates and D&O claims, it is reasonable to assume that the activities of directors and officers will be closely scrutinised by insolvency practitioners. There may be businesses heading into the current inflationary environment having acquired additional debt to survive the Covid-19 pandemic. Where companies fail with significant liabilities owed to creditors, the conduct of directors will come under the spotlight.

Decrease in the number of IPOs & SPACs

D&O insurers have enjoyed a steady stream of new business from IPOs (Initial Public Offerings) and the rise of SPACs (Special Purpose Acquisition Companies) however, there is a marked reduction in 2022 due to a combination of higher interest rates, tougher regulatory rules, and a lack of viable acquisition targets. Another cause for concern for insurers is the increase in claims against SPACs.

D&O capacity stabilising

Capacity continued to increase in 2022 and insurers also increased line sizes following the reduction implemented during the hard market. However, the continued growth in 2023 has wavered. D&O was subject to greater focus by Lloyd’s of London during its review of syndicate business plans, and overall was the only class of insurance not supported for growth for 2023. There is now closer cooperation between national and international regulators. Regulators have greater powers with new criminal offences.

Environmental, social and governance (ESG)

ESG is an area of increasing concern to D&O insurers as more claims are being made against directors for misleading ESG disclosures and ‘green washing’. Are companies doing enough to ensure the firm’s future and address climate change issues, equality, diversity and ethics?

Russia / Ukraine war

As companies write off Russian assets and market streams, cyber-attacks increase, or foreign sanctions impact companies’ operations, insurers remain concerned about the potential risk this has on directors and claims potential under the D&O policy.

Cyber risks

Cyber-attacks and data breaches have been a top concern for company boards for many years now and can have a detrimental effect on any business, both financial and reputational. Shareholders who have suffered a loss because of a cyber incident can pursue the company and directors for compensation if negligence exists.

European developments

Directors and officers are likely to face more D&O claims as a result of the EU whistle-blower directive. There will be fines against companies and their management teams for failing to establish and operate an internal whistle-blower reporting system. The additional protection offered to whistle-blowers is expected to make it easier for company lawlessness to be exposed, leading to more investigations and potentially more claims against directors

ESG is an area of increasing concern to D&O insurers as more claims are being made against directors for misleading ESG disclosures and ‘green washing’.

Key findings:

  • Premium rates are falling for now – a welcome change following the hard market, though it is uncertain for how long

  • Global headwinds have the potential to dampen premium decreases in 2023 – macroeconomic and political factors are likely to cause premium rates to stabilise as we progress further into the year

  • Claims will likely increase due to greater director accountability – the risk landscape includes recession and company insolvency, ESG, cyber threat and enhanced regulatory activity

Contact Robertson Low to discuss Directors’ and Officer’s Liability insurance for your clients. We have experience in placing difficult and diverse risks with bespoke solutions.

Our professional team has a strong track record of delivering positive results on behalf of clients in all market conditions. Call Associate Director Lesley Fitzpatrick on 086-8274956.


1] Directors’ & Officers’ Liability (D&O) Insurance Report 2023 outlook: Navigating global headwinds, Howden Broking Group

2] Directors’ & Officers’ Liability Insurance: Is the Market Softening? Howden Broking Group

3) Directive (EU) 2019/1937 of the European Parliament and of the Council

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