Management Liability Insurance Market in 2025: Stability Amid Evolving Risks

Management Liability Insurance Market in 2025: Stability Amid Evolving Risks
March 18, 2025 15 mins

Management Liability Insurance Market in 2025: Stability Amid Evolving Risks

Management Liability Insurance Market in 2025: Stability Amid Evolving Risks

Market stability prevails in management liability lines as insurers continue to seek market share. However, expanding technologies, increased litigation and macroeconomic factors are causing growing uncertainty and underwriting concerns.

Key Takeaways
  1. Competition, capacity and stable markets give management liability clients a variety of positive options.
  2. Directors and officers, employment practices liability, fiduciary liability, and crime and kidnap, ransom and extortion continue to create favorable pricing environments for most buyers.
  3. However, rising claim frequency and severity, a challenging ESG landscape and the risk and rewards of artificial intelligence present potential underwriting red flags.

Table of Contents

  1. Directors and Officers Liability

  2. Employment Practices Liability

  3. Fiduciary Liability

  4. Crime and Kidnap, Ransom and Extortion

  5. Aon’s Thought Leaders

Amid competitive markets with ample capacity and favorable pricing, management liability lines enter 2025 with continued stability.

However, potential risks linger within the current business landscape. A developing litigation climate, the impact of artificial intelligence (AI), cyber threats and an evolving ESG landscape may signal a changing claims environment in directors and officers (D&O), employment practices liability (EPL), fiduciary liability, and crime and kidnap, ransom and extortion lines.

Directors and Officers Liability

How’s the Market?

Pricing: Pricing for public companies remains stable with rate decreases less than a year ago. Primary layer pricing is trending to mid-single digit decreases, however, some carriers are firming their stance on pricing reductions, leading to what is expected to be largely a flat rate environment. Sectors with higher risk profiles, including technology, life sciences and financial services, may face rate increases due to higher litigation and regulatory exposures.

Pricing for private and nonprofit organizations is also stable with single digit decreases for clients with positive risk stories in favorable industries. Price increases are evident across large nonprofit organizations including higher education and healthcare. Excess program pricing continues to be more favorable than primary placements, often resulting in single-to-double digit decreases.

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Capacity: The market is currently oversupplied with more than $1 billion of market capacity available. Insurers are starting to rethink capacity deployment due to current premium levels and profitability. Newer carriers in the market are struggling to gain market share.

Coverage: Coverage in 2025 will likely reflect the ongoing evolution in risk profiles. Insurers will continue to adapt their policies to address emerging risks, such as AI, cyber threats, regulatory changes and ESG-related exposures. There may be a trend toward more tailored policies, offering bespoke coverage options that cater to the specific needs of different industries. However, policyholders should anticipate continued scrutiny of terms and conditions, with exclusions and endorsements remaining prevalent.

Exposures: Claims frequency is up in securities class actions derivative actions. Severity is increasing mostly in the derivative space.

“We are still in a situation where we are over capacity for most insureds,” says Jennifer Thorpe, Aon FSG’s chief client officer in the United States “Most clients going into the market to obtain D&O have an abundance of options and there are a lot of carriers willing to write D&O. We are starting to see some exit public D&O, but not many.”

What’s Concerning Underwriters?

Underwriting standards in 2025 will continue to emphasize thorough risk evaluation and prudent decision making. Insurers are expected to place significant underwriting emphasis on the company’s financial and operational strategies, such as the use of AI, cyber risk mitigations and recognizing the growing importance of evolving risks.

“We don’t know how the change in administration will ultimately impact the D&O landscape, but what we do know is that everything a company does at the board level is increasingly being scrutinized,” says Adam Furmansky, deputy D&O product leader at Aon in the United States “There are just more opportunities for D&O claims to be filed. It seems that as anything develops in the larger economy, it can lead to a source of claims.”

As a result, companies will need to demonstrate strong governance frameworks, transparent reporting and proactive risk management to secure favorable underwriting terms. The integration of advanced data analytics and technology in underwriting processes is also likely to enhance risk assessment accuracy and efficiency. Some of the top risk concerns of D&O underwriters include:

  • Derivative and Securities Class Actions: Derivative lawsuit settlements continue to rise in frequency and severity as evidenced by 13 of the 18 historical shareholder derivative settlements over $100 million settled in the last five years. Securities Class Action filings increased 15 percent in 2024, with 225 filings occurring.1 D&O insurers closely track the annual number of securities class action lawsuit filings. The number of annual filings can help determine insurer loss costs and profits for insurance products.2
management-liability-insurance-03-24

Source: Aon FSG Quarterly Pricing Index

  • SEC Investigations and Enforcement: The Securities and Exchange Commission (SEC) closed its fiscal year 2024 with the division of enforcement recovering $8.2 billion in financial remedies, far and away its largest recovery in any fiscal year. Given the SEC’s robust enforcement activity, companies with SEC exposure and their respective D&Os should carefully consider and regularly audit the contours of their D&O liability insurance coverage.
  • ESG: ESG as a source of potential D&O exposure continued to evolve in 2024. The rise of anti-ESG sentiment presents organizations’ board of directors with a balancing act. While ESG initiatives can attract some investors and address evolving stakeholder demands, they can also encounter resistance from stakeholders with opposing views.
  • DEI Initiatives: Driven by litigation, congressional hearings and investigations, the short-term future of DEI initiatives is currently unclear, however, it is being watched closely for its potential impact to directors and officers. Further, the new administration’s executive order on DEI in the federal contracting process introduces additional volatility.
  • Artificial Intelligence: How companies tell their AI story, including overstating their capabilities and prospects, could lead to significant consequences for corporate and securities litigation risks. In 2024, several companies faced SEC or private securities class action litigation based on their alleged statements about their AI-related capabilities or prospects.3
  • Cyber Security Disclosure: In the event of a major cyber breach, shareholders or regulators may sue company directors and officers claiming they failed to adequately implement cyber security practices, monitor risks or disclose incidents promptly, leading to potential D&O claims.
  • Bankruptcies: In the private and nonprofit space, macroeconomic concerns including rate pressure, liquidity and inflation, coupled with the rise in bankruptcy, filings are a concern. Organizations and their directors, officers and trustees may be sued for host of issues including failure to disclose liabilities, breach of contract, improper accounting practices or asset transfers, mismanagement of funds or self-dealing.
  • Regulatory Changes: As insurers navigate the capricious regulatory environment regulators may bring claims relating to failure to comply with new regulations including allegations under the False Claims Act.4

Employment Practices Liability

How’s the Market?

Pricing: The employment practices liability (EPL) market is stable, but firming. The market remains competitive with ample capacity. However, increased claim frequency kept rates down over the course of 2024, and trending toward flat by the end of the year. This could be changing.

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“In the next year we may start seeing some pricing increases. Similar to D&O, there is much capacity in the market with a lot of insurers interested in growing their books, and that has held pricing down, but the current negative claims trends in 2025 may send pricing toward at least small increases,” says Tom Hams, Employment Practices Liability practice leader at Aon.

What’s Concerning Underwriters?
  • DEI Initiatives: Initiatives in place have previously helped companies prevent discrimination and bias in the workplace, while also assisting in mitigating EPL claim impacts. However, under the new U.S. administration, recent executive orders may consider some DEI initiatives to be unlawful discriminatory programs that violate anti-discrimination laws and potentially impede merit-based opportunities.5 This will have an impact on private businesses, as companies could face increased discrimination and harassment claims when adhering to the requirement to pull back on the DEI efforts. Alternatively, there is concern that prior and future DEI initiatives could be at increased risk for resulting in reverse discrimination claims.
  • Use of AI in Hiring: Underwriters are assessing the potential bias that AI may contribute in hiring decisions. Further, use of AI to assist an employer in making hiring decisions is getting attention at the state level, with legislators in several states proposing bills to provide transparency about AI use and mitigate the risk of AI discrimination. Markets are therefore asking questions about AI usage to ensure there is human involvement in decision making and that decisions are not left solely to the software itself.
  • Expansion of Pay Transparency: Pay transparency laws aim to address pay inequality by requiring employers to disclose compensation information and increasing employee access to salary data. While these laws vary per region, they often mandate employers to share salary ranges in job postings or disclose salary information to existing employees and job applicants. The EEOC included equal pay initiatives in its SEP for 2024-28. Additionally, some states and municipalities are implementing their own pay transparency and wage discrimination legislation.

    “The unique aspect of these statutes is they often don’t require the plaintiff to allege discrimination to allege that the statute was violated. Effectively all they must allege is that the pay band was wrong or not listed,” adds Hams. “Yet, the goal of these statutes is to encourage pay equity and avoid discrimination in pay. The concern, from a coverage perspective, is that the EPLI carrier could take the position that, since the plaintiff in these actions didn’t have to allege discrimination there’s no covered wrongful act.”

Fiduciary Liability

How’s the Market?

The fiduciary liability market is stable, with insurers making slight pricing reductions; capacity is also adequate. Litigation results, however, could move rates higher.

“We’ve seen modest reductions in premium since the end of 2023 and through 2024,” says Jay Desjardins, Fiduciary Liability practice leader at Aon. “Forecasting for 2025, barring anything in the litigation world to the contrary, says the market should be stable. The reason is that insurers, in response to retirement plan excessive fee litigation, have managed the exposure through higher retentions that are applied either to excessive fee litigation specifically or to all mass or class actions.”

Management Liability Insurance-05
What’s Concerning Underwriters?

Retirement Plans: There are several main sources of litigation:

  • Excessive Fee Litigation: Excessive fee litigation — which generally alleges that sponsors and fiduciaries of defined contribution (DC) plans breached their duties under ERISA by overpaying for third-party investment management or administration services — remains the primary concern among insurers. Since 2005, there have been more than 500 lawsuits — and 70 percent of those cases have been filed since 2020. These cases have resulted in settlements totaling over $1.73 billion (not including defense costs).
  • Plan Forfeiture Cases: Plan forfeiture cases involve how a DC plan sponsor uses matching funds of employees who leave the company before those funds fully vest. Companies have used it to pay their own matching contribution obligations instead of defraying plan expenses. This practice has been permissible under ERISA for decades as long as companies reserve the right to do so in the plan document. Now, however, it is being challenged, with more than 35 cases filed in the past 18 months.
  • Pension Risk Transfer/Annuitization of Defined Benefit Plans: Through annuitization of a defined benefit plan, which is permitted under ERISA if properly conducted, plan sponsors shift their obligations off the company balance sheet and onto an annuity provider to reduce risk. Over the last year, more than 10 cases have been filed challenging the selection of annuity providers, arguing that such providers are not financially strong enough to be able to pay the benefits over time.

Health Claims: There are two main sources of litigation:

  • Nicotine Surcharge Cases: More than 20 cases have been filed against employers who impose a “tobacco surcharge” under their group health plans for employees who use tobacco products. While ERISA does not prohibit employers from charging such a penalty, its anti-discrimination provision requires that employers provide a reasonable alternative to paying the penalty, such as participating in a smoking cessation program. Among other allegations, the lawsuits contend that while the employers offered a smoking cessation program, they failed to allow for the retroactive removal of the penalty for employees who completed the program.
  • Health Plan Fee Litigation: Recent amendments to ERISA have reinforced the duty of plan sponsors and their fiduciaries to monitor the reasonableness of third-party fees that are charged to health plans, including by third party administrators and pharmacy benefit managers. Health plan sponsors and their fiduciaries must monitor those fees in much the same way as retirement plan sponsors and their fiduciaries must monitor third-party service provider fees.

Crime and Kidnap, Ransom and Extortion

How’s the Market?

The fidelity/crime insurance environment continues to be stable and vibrant, with insured demand for coverages remaining high. The overall fidelity/crime market continued to stabilize from a pricing perspective in 2024, with underwriting remaining consistent within the U.S., London and Bermuda markets. Robust limits are available for all coverages, provided the control environment for each risk factor is viewed positively by the underwriters.

“We are optimistic heading into 2025 for the fidelity and crime products within the financial institution and commercial arenas. We expect continued market pressure on rates, however, the availability of viable markets should continue to offer businesses with alternatives,” says Chris Gilman, a National Fidelity practice leader for Aon

What’s Concerning Underwriters?

Underwriter focus remains on historical risk factors, including financial strength, employee oversight and computer crime/funds transfer fraud controls. Remote work, social engineering and AI mitigants are also top of mind. “Due to the various risk factors inherent in any business, financial institutions and commercial organizations are keenly aware that their internal and external fraud threat landscape needs continued attention,” says Gilman.

  • Clarification of exposures, Social Engineering and Use of AI: In general, programs have been clarified to acknowledge that theft of information, destruction of data, reconstruction costs related to the destruction of data and extortion cover are not the subject matter of fidelity/crime polices. Instead, they have been viewed by the market as contemplated within a cyber policy. “While we expect the frequency of social engineering notifications to continue and evolve through the use of AI, employee losses have remained the largest threat to organizations as a matter of size,” adds Gilman.
  • Fraud Controls: Raising fraud awareness and clarifying individual employee accountability within any firm continue to be viewed by underwriters as an effective tool to improve risk profiles. Businesses that show strong fraud prevention and detection capabilities, tight control processes, and cutting-edge technologies to detect and/or prevent fraud, are generally able to directly correlate those factors into a strong, well-supported FI bond or crime program.
  • Kidnap & Ransom: There is continued availability of comprehensive coverage terms in the market. However, coverage remains limited in Russia, Ukraine and other territories with ongoing conflict. There has been a global increase in kidnap for ransom cases, particularly in the U.S., where threats have been on the rise. Pricing is highly dependent upon analyzing the information presented to the underwriters, and exposure to high-risk territories generally leads to upward pressure on rates.

    Businesses that are coming off three-year deals with ramped-up operations, expanded territories and newly hired employees since the last renewal (even in the U.S.), are experiencing price changes due to this exposure growth. As global volatility and various conflicts continue in 2025, kidnap & ransom insurers will closely monitor those higher-risk territories. Crisis management firms are a critical response component of the coverage purchased, and they stand ready to handle the situations as they arise.

Aon’s Thought Leaders

Jay Desjardins
Fiduciary Liability Practice Leader, United States

Timothy Fletcher
Chief Executive Officer, Financial Services Group, United States

Chris Gilman
National Fidelity/Crime Practice Leader, United States

Adam Furmansky
Deputy D&O Product Leader, Financial Services Group, United States

Thomas Hams
Employment Practices Liability Practice Leader, United States

Cara LaTorre
National Kidnap and Ransom Leader, United States

Catherine Padalino
Private and Nonprofit Practice Leader, Financial Services Group, United States

Jennifer Thorpe
Chief Client Officer, Financial Services Group, United States

1 Securities Class Action Filings 2024 Year in Review, Cornerstone Research
2 Federal Court Securities Class Action Lawsuit Filings Increased in 2024, The D&O Diary
3 The Top Ten D&O Stories of 2024, The D&O Diary
4 DEI Executive Order Implies Threat of FCA Litigation, Orrick
5 How to Adjust Your I&D Initiatives Under Trump’s New Guidelines, SHRM

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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