Navigating Emerging D&O Risks: Insolvencies, AI, and Geopolitical Tensions in 2025
Insights from Allianz Commercial on managing Directors and Officers’ complex challenges for the year ahead.
In an interconnected and volatile global environment, Directors and Officers (D&Os) face mounting challenges. Allianz Commercial's latest report highlights key risk trends for 2025, including the impact of rising insolvencies, geopolitical pressures, and the emerging phenomenon of ‘AI washing’. While the D&O insurance market remains competitive for buyers, increased scrutiny of corporate conduct around the globe keeps loss potential high.
Top four risk trends
1. Insolvency risks on the rise
Global business insolvencies are anticipated to grow by 11% in 2024, with major insolvencies already increasing by 26% year-on-year for the first three quarters of the year, according to Allianz Trade. This trend is fueled by significant economic pressures, placing sectors such as real estate, construction, and hospitality at heightened risk. As a result, directors may face an increased likelihood of potential claims from lenders seeking to recover losses or from shareholders alleging breaches of fiduciary duties.
2. Geopolitical tensions amplify liability
The geopolitical landscape remains turbulent, with ongoing conflicts in Ukraine and the Middle East and tensions between the US and China. These developments pose substantial legal and operational risks to businesses. Companies can face scrutiny for their non-compliance with international sanctions, or for failing to adequately manage risks related to politically unstable regions. D&Os can be held accountable for misjudging the impact of geopolitical developments on their company’s operations, leading to shareholder lawsuits or regulatory penalties.
3. ‘AI washing’: A growing litigation concern
As artificial intelligence transforms industries, companies must also adapt quickly to potential exposures around disclosure, regulation, shareholder scrutiny and litigation. ??Some companies are already overstating their technological capabilities, a practice known as ‘AI washing’. This trend has led to securities class action lawsuits, particularly in the US. However, this risk extends beyond North America, as any company that has its stock listed on a US exchange is subject to US securities law.?
4. Third-party litigation funding expands
The global litigation funding industry is experiencing rapid growth, with an expected compound annual growth rate of nearly 10% through 2028. This expansion is driving a rise in investor claims, often increasing the complexity and cost of litigation as funders employ aggressive strategies and extensive resources to pursue cases.
领英推荐
Expert perspectives:
“The D&O insurance market has remained competitive for buyers over the past year, but loss potential is still high,” says Vanessa Maxwell, Chief Underwriting Officer, Allianz Commercial. “The litigation landscape and enforcement are increasingly stringent, and we are seeing regulatory bodies across the globe step up scrutiny of corporate conduct, making D&Os more vulnerable to investigations, penalties and lawsuits.”
“D&Os need to update their knowledge around geopolitical and regulatory changes more regularly than ever before,” notes Jarrod Schlesinger, Global Head of Financial Lines and Cyber, Allianz Commercial. “A once-a-year review is no longer sufficient in the volatile era businesses are now operating in. These trends are driving the need for D&O policies that are responsive to multi-jurisdictional risks and can provide local coverage for legal defence costs, settlements and other liabilities.”
Conclusion:
D&Os must navigate a dynamic risk landscape characterized by insolvencies, geopolitical instability, and emerging challenges like AI-related exposures. Allianz Commercial emphasizes the importance of responsive D&O policies and proactive governance to mitigate these risks.
Want to learn more about the key risk trends for D&Os in 2025?
..and don’t forget to subscribe to this newsletter to stay on top of business risks, mitigation strategies and commercial insurance trends: https://www.dhirubhai.net/build-relation/newsletter-follow?entityUrn=7249674152066830336
#AI #litigation #insolvency #geopolitics #DandOTrends25 #AllianzCommercial
Regional Head of Claims Asia at Allianz Commercial (AGCS)
2 个月Great D&O insights