The Baldwin Group has released the 2025 Directors & Officers (D&O) Benchmarking Report, providing detailed insights into insurance trends across public companies segmented by industry and market capitalization.
The report, now in its fourth edition, tracks continued declines in D&O premium rates and retentions but also identifies a widening gap between purchased coverage levels and actual litigation exposures.
According to the report, average premium costs and retentions fell again in 2024, marking the third consecutive year of softening conditions in the D&O market. Average retention levels dropped from $2.5 million to $1.5 million, and the average premium for $5 million in coverage fell to $277,985, down from $315,222 a year earlier. Technology and healthcare sectors recorded the largest rate reductions, at -15.0% and -13.6%, respectively.
The broader D&O market has experienced consistent softening since 2022, driven by increased carrier capacity and competitive pricing. Insurers have been offering more favorable terms because of diminished claims frequency and greater competition among underwriters.
This trend is expected to persist into 2025, providing many companies with an opportunity to reassess and optimize their D&O coverage relative to their actual risk exposures.
Despite lower costs, the findings suggest that many companies, particularly those in the mid-cap range, may be purchasing more D&O insurance than necessary relative to their risk profile. Benchmarking data points to companies spending on higher coverage limits even when historical claims data indicates lower actual exposure.
Michael Tomasulo (pictured above), senior managing partner and national practice leader at The Baldwin Group, said that while renewal rates continue to decline, companies are not always aligning their insurance purchases with their capital strategies.
“Our data shows that while a company may be purchasing $40 million in D&O limits, their actual claims exposure might be a fraction of that – essentially purchasing limits they may never actually need,” Tomasulo said.
Supporting this view, settlement data from Stanford Securities Litigation Analytics shows that the median settlement amount for securities class actions fell to $14 million in 2024, a drop from a 13-year high recorded in 2023. The average settlement amount also decreased by 13% to $42.4 million.
These reductions suggest that litigation exposures may be lower than previously estimated, reinforcing the notion that some companies could be maintaining unnecessarily high D&O limits.
Data from Stanford Securities Litigation Analytics and The Baldwin Group show that public companies with a market capitalization between $500 million and $1 billion face average securities class action settlements of $8.2 million. Including legal costs and related expenses, total risk exposure typically ranges between $12 million and $15 million.
However, companies in this market segment are often securing up to $40 million in D&O coverage, indicating a possible excess of $15 million to $20 million beyond likely exposure.
Emerging risks, particularly around corporate disclosures about artificial intelligence (AI), are also influencing D&O risk profiles. In 2024, the Securities and Exchange Commission (SEC) initiated enforcement actions related to “AI washing,” where companies were found to have overstated their AI capabilities.
Shareholders filed 13 securities class action lawsuits tied to these claims, signaling heightened scrutiny of corporate statements involving AI and the need for companies to carefully manage public disclosures to avoid litigation exposure.
Dan Galbraith, president of The Baldwin Group and CEO of retail brokerage operations, said that insurance decisions are frequently handled as isolated transactions.
“This report gives leaders the clarity to right-size their D&O programs – not just to save money, but to ensure that every dollar spent supports the bigger picture of how they grow, govern, and protect their business,” Galbraith said.
Further analysis of settlement trends by sector shows notable differences across industries. Between 2015 and 2024, the median settlement for securities class actions varied widely: financial companies settled at $19.6 million, technology firms at $12 million, pharmaceuticals at $9.8 million, telecommunications at $11.8 million, retail at $24.5 million, and healthcare at $21 million.
The 2025 report also offers detailed benchmarking of premium trends by industry sector and company size, allowing firms to compare their renewal experiences against similar organizations.
Although the overall market saw an average rate decrease of -9.7% in 2024, the report underscores that cost reductions may have limited value if coverage levels remain misaligned with actual risk exposure.
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