Rising Insolvencies, Geopolitics Shape D&O Risks

Directors and officers (D&Os) face mounting risks in 2025 as rising insolvencies, geopolitical tensions, and AI-related litigation dominate the corporate landscape, according to Allianz Commercial’s latest D&O Insurance Insights report.

Global insolvencies are projected to rise by 11% in 2024, with major insolvency cases up 26% year-on-year for the first three quarters. Countries comprising over half of the global GDP are experiencing double-digit increases, heightening litigation risks for executives.

“The global rise in business insolvencies is a particular focus of concern,” said Vanessa Maxwell, chief underwriting officer at Allianz Commercial. “Leaders are exposed to claims from lenders and shareholders alleging breach of fiduciary duty.”

Sectors such as real estate, construction, and tourism are particularly vulnerable due to inflation, higher interest rates, and economic instability, according to Dan Holloway, head of global management liability at Allianz Commercial.

Geopolitical risks, including conflicts in Ukraine and the Middle East, further compound challenges for executives. Companies face heightened scrutiny for non-compliance with sanctions or misjudging political risks, potentially leading to shareholder lawsuits or regulatory penalties.

“D&Os need to update their knowledge around geopolitical and regulatory changes more regularly than ever before,” said Jarrod Schlesinger, global head of financial lines and cyber at Allianz Commercial.

Emerging risks tied to artificial intelligence (AI) are also creating vulnerabilities. The trend of “AI washing,” where firms overstate their AI capabilities, is drawing shareholder scrutiny and securities class action lawsuits.

“AI-related litigation is increasing,” Schlesinger noted. “Companies must adapt quickly to exposures around disclosure, regulation, and shareholder expectations.”

The growing role of third-party litigation funding adds to the complexity, as funders drive aggressive strategies, increasing costs and the likelihood of lawsuits.

In Asia, the D&O insurance market remains highly competitive, with premiums declining in 2024. However, executives in the region still face significant risks due to economic pressures and the evolving liability landscape.

“Despite rate erosion and shrinking market size, D&O insurance remains crucial,” said Danielle An, regional practice leader for management liability at Allianz Commercial.

Executives are advised to prioritize risk management and ensure D&O policies are tailored to address multi-jurisdictional challenges and emerging threats.