Geopolitics and cyber risks reshape D&O insurance landscape

SINGAPORE — Political instability, cyber threats, and economic uncertainty are increasingly exposing corporate boards to liability risks that could lead to shareholder lawsuits, regulatory penalties, and multimillion-dollar settlements, according to the “Directors and Officers Insurance Insights 2026” report by Allianz Commercial.

Released on December 3, the report warns that directors and officers (D&Os) across both public and private companies face mounting legal and financial challenges due to geopolitical conflicts, emerging technologies such as artificial intelligence (AI), regulatory scrutiny, and a sharp rise in global insolvencies.

“Directors and officers (D&O) liability continues to develop at pace, with an evolving regulatory and litigation environment, an increasingly complex risk landscape, and an uncertain geopolitical and economic outlook,” said Jarrod Schlesinger, global head of financial lines and cyber at Allianz Commercial.

Geopolitical and trade risks increase board-level liabilities

Geopolitical upheavals—such as armed conflicts in over 100 regions, according to the Geneva Academy—have escalated uncertainty across supply chains, trade flows, and investment strategies. The Bank of America survey cited in the report found that 60% of firms are considering reshoring production due to tariffs, despite challenges such as high costs and labor shortages.

Heather Fong, North America head of product development for financial lines at Allianz Commercial, noted, “The US has the most litigious business environment in the world… the very real risk of US litigation may make these moves cost prohibitive.”

In addition, the report highlights how directors could be held personally liable for failing to anticipate or adapt to legal and regulatory changes across jurisdictions. This includes compliance with sanctions, trade restrictions, and evolving rules around diversity, equity, and inclusion (DEI).

“Geopolitical intelligence and business impact analysis need to become integral parts of organizational risk management and strategic decision-making,” said Ralph Viand, product development and multinational lead at Allianz Commercial.

Cyber threats dominate claim trends

Cyber risk remains the top concern for D&Os. Ransomware attacks alone accounted for 60% of the value of large cyber insurance claims (exceeding EUR 1 million) in the first half of 2025, according to Allianz’s Cyber Security Resilience Outlook.

The severity of attacks has also intensified, with double extortion tactics—combining ransom demands with data theft—now comprising 40% of cyber claims by value, up from 25% in 2024. Supply chain disruptions through contingent business interruption (CBI) events made up 15% of large cyber claims in early 2025, compared with 6% in the previous year.

“Cyber risk must be a top priority today — simply delegating it is not enough,” said Alfred Mora, chief underwriter for financial lines in Germany and Switzerland. “The most effective protection… is not just technical IT solutions, but well-organized, documented, and forward-looking management.”

David De Greef, head of financial lines and cyber for Benelux, emphasized that boardroom responsibility is now firmly tied to cyber preparedness: “With ongoing cyber-attacks and increasing regulation it will be easier to go after [directors]. And while they might not be at fault, they can still face significant defense and investigation costs.”

AI and PFAS drive litigation exposure

AI is becoming a flashpoint for regulatory enforcement and shareholder activism. The report cites that the global AI market is projected to reach USD 4.8 trillion by 2033, a 25-fold increase in a decade. However, misleading claims about AI capabilities—so-called “AI-washing”—have led to 12 securities class action lawsuits in the first half of 2025 alone, with a total of 53 since 2020.

“Cyber and AI are difficult risks to predict… emerging areas like AI have the potential to drive a significant increase in directors and officers liability in the future,” said Sandy Codding, regional head of portfolio steering for North America.

Directors are also increasingly exposed to litigation related to “forever chemicals,” or PFAS (per- and polyfluoroalkyl substances), due to health and environmental risks. The report cites a USD 10.3 billion settlement by 3M over water contamination claims and estimates by Verisk that total PFAS-related litigation costs could reach USD 165 billion.

“We are seeing securities litigation where shareholders allege that the directors failed to identify potential PFAS liability exposures,” said Dan Holloway, head of management liability at Allianz Commercial.

Insolvencies and mega bankruptcies on the rise

Insolvency risks remain a significant source of D&O claims. Allianz Trade forecasts a +6% rise in global business insolvencies in 2025 and another +5% in 2026—bringing totals to 24% above pre-pandemic levels. The U.S. experienced 17 “mega bankruptcies” in the first half of 2025 alone—defined as bankruptcies involving companies with more than USD 1 billion in reported assets.

“It’s important that directors understand their expanded fiduciary duties in the event of an insolvency, seek expert advice, and keep detailed records of all key decisions,” said Sarah Geraghty, global underwriting lead at Allianz Commercial.

D&O insurance market outlook

The report provides a regional outlook on the D&O insurance sector:

• North America: Settlement values for securities class actions rose 27% to an average of USD 56 million in the first half of 2025. The U.S. market remains litigious and complex.
• Asia: The market is experiencing rate erosion due to abundant global capacity. Many clients are reducing insurance budgets, leading to more competitive tenders.

“It is a good time for new potential buyers to consider purchasing D&O insurance,” said Josephine Tam, regional head of financial lines and cyber at Allianz Commercial Asia.

• UK and Europe: Soft markets and economic pressure continue to shape purchasing behavior, while rising insolvencies are driving mid-market interest in D&O protection.
• Latin America: D&O insurance is expanding, driven by stricter anti-corruption enforcement and rising ESG awareness.