The Baldwin Group has unveiled its 2025 Directors & Officers (D&O) Benchmarking Report, shedding light on the latest trends in insurance for public companies. Released on May 30, 2025, this fourth edition of the report highlights a significant decline in D&O premium rates and retentions, while also revealing a growing disconnect between the levels of coverage companies are purchasing and the actual risks they face.
The report notes that average premium costs and retention levels have continued to drop for the third year in a row. In 2024, the average retention decreased from $2.5 million to $1.5 million. At the same time, the average premium for $5 million in coverage fell to $277,985, down from $315,222 in the previous year. The technology and healthcare sectors experienced the largest reductions, with rates falling by 15% and 13.6%, respectively.
This softening trend in the D&O market has been ongoing since 2022, primarily due to increased capacity from insurance carriers and heightened competition. Insurers are offering better terms as claims frequency has decreased, making it easier for companies to secure favorable rates.
Looking ahead to 2025, the report suggests that many businesses may want to reevaluate their D&O coverage to better align with their actual risk exposures. Despite the lower costs, some companies, especially those in the mid-cap range, are still buying more coverage than they need. The data indicates that many firms are opting for higher limits, even when their historical claims data shows they have lower exposure.
Michael Tomasulo, a senior managing partner at The Baldwin Group, pointed out that while renewal rates are on the decline, companies often fail to align their insurance purchases with their overall capital strategies. He noted that many firms might be purchasing $40 million in D&O limits, despite their actual claims exposure being much lower.
Settlement data from Stanford Securities Litigation Analytics supports this observation. The median settlement for securities class actions dropped to $14 million in 2024, a significant decrease from the 13-year high seen in 2023. The average settlement also fell by 13% to $42.4 million, suggesting that litigation risks may be lower than previously thought.
The report also highlights that public companies with market capitalizations between $500 million and $1 billion typically face average settlements of around $8.2 million for securities class actions. However, many of these companies are securing up to $40 million in D&O coverage, indicating a potential excess of $15 million to $20 million beyond their actual risk.
Emerging risks related to artificial intelligence (AI) are also affecting D&O risk profiles. In 2024, the SEC began taking action against companies for overstating their AI capabilities, leading to 13 securities class action lawsuits. This situation emphasizes the need for companies to manage their public disclosures carefully to minimize litigation risks.
Dan Galbraith, president of The Baldwin Group, emphasized that insurance decisions are often made in isolation. He believes that the report provides valuable insights for leaders to optimize their D&O programs, ensuring that their spending aligns with their business goals.
Overall, the 2025 D&O Benchmarking Report offers detailed benchmarking data, allowing companies to compare their experiences with those of similar organizations. While the market saw an average rate decrease of nearly 10% in 2024, the report warns that cost reductions may be of little value if coverage levels do not match actual risk exposures.