Directors and Officers (D&O) Insurance: Protecting Boardroom Decisions in 2026
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Directors and Officers (D&O) Insurance:
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Running a company has never come with a personal liability exclusion. Directors and officers make decisions every day that can later be scrutinised by shareholders, regulators, employees, creditors, and competitors. When things go wrong — and in 2026's environment of AI disruption, geopolitical turbulence, ESG backlash, and rising insolvencies, things go wrong with increasing frequency — those decisions become the subject of lawsuits and regulatory actions that reach beyond the company itself to the people who made the calls.
Directors and Officers (D&O) insurance is the financial protection that stands between a boardroom decision and a director's personal bank account. It covers defence costs and settlements when executives are sued for how they managed the company — regardless of whether the claim is ultimately successful.
Claims severity and settlement costs are increasing, especially in the US, while the commercial financial lines insurance market remains highly dynamic. Around the world, political, economic, and social uncertainties are on the rise, impacting every aspect of a company's operations and leading to significant changes in financial, regulatory, and legal environments.
This guide explains exactly what D&O insurance covers, the three types of coverage every programme needs, the key risks driving claims in 2026, what the market looks like right now — and how to build a D&O programme that will actually protect your leadership team when it matters.
What D&O Insurance Covers — and What It Doesn't
D&O insurance pays for defence costs, settlements, and judgments that arise from claims alleging wrongful acts by directors and officers in their management capacity. The key term is wrongful act — typically defined in policy language as any actual or alleged error, misstatement, misleading statement, omission, neglect, breach of duty, or breach of trust committed by an insured person in their capacity as a director or officer.
What this covers in practice is broad: securities fraud claims, shareholder derivative suits, regulatory investigations by the SEC or FCA, employment-related claims brought by terminated executives, misrepresentation claims by investors, and creditor actions during insolvency. The common thread is a claim that directors or officers made a decision — or failed to make one — that harmed someone with standing to sue.
What D&O typically does not cover includes: bodily injury and property damage claims (these belong in general liability), fraud or intentional misconduct where guilt has been established by final adjudication, personal profit from illegal remuneration, and claims between insured persons (the "insured vs. insured" exclusion, which prevents collusive claims within management teams).
Understanding where D&O ends and where other policies — general liability, EPLI, cyber, fiduciary liability — begin is critical. Gaps between policies are where uninsured losses live.
The Three Coverage Parts — Side A, B, and C
D&O insurance is structured in three distinct insuring agreements, and understanding each is essential for building a programme that actually protects individuals and the company effectively.
Side A — Individual Director Protection
Side A coverage protects individual directors and officers directly — paying their personal defence costs and any settlement or judgment when the company is unable or legally prohibited from indemnifying them. This happens when the company is insolvent, when state law prohibits indemnification for a particular type of claim, or when the company simply refuses to indemnify.
Side A D&O insurance is non-negotiable when corporate indemnity fails due to risk. Without Side A coverage, a director facing a shareholder lawsuit in an insolvent company has no financial protection beyond their own personal assets.
Side A Difference-in-Conditions (DIC) policies — standalone Side A policies that sit excess of the primary D&O programme — are increasingly common for boards that want certainty that individual protection is available regardless of what happens to the main programme limits. For directors joining companies with significant pre-existing liability exposure, demanding a robust Side A programme is a matter of basic financial self-protection.
Side B — Corporate Reimbursement
Side B coverage reimburses the company for the amounts it pays to indemnify its directors and officers under corporate indemnification agreements. This is the most frequently triggered part of most D&O programmes — the company advances defence costs for its executives and later receives reimbursement from the insurer.
Side B coverage allows companies to maintain robust indemnification agreements with their leaders without bearing the full financial burden of defending those leaders when claims arise. For large companies with multiple board members and senior executives, Side B exposure in a single securities class action can reach tens of millions of dollars.
Side C — Entity Coverage
Side C, or "entity coverage," protects the company itself for securities claims — typically shareholder claims against the corporate entity as well as its officers. For public companies, Side C is standard practice and represents a significant portion of premium allocation.
For private companies, entity coverage is typically more limited in scope, covering the company for certain employment and management claims. Private company programmes should be reviewed carefully to ensure the entity coverage aligns with the actual litigation risks the company faces.
The Big Risk Drivers for D&O in 2026
Geopolitical tensions, artificial intelligence, tariffs, and cyber threats are just a handful of the risks that directors and officers — and underwriters — cite as concerns entering 2026. Here is how each of these risks translates into D&O exposure.
AI Governance and "AI Washing" Liability
The boardroom's duty to oversee AI has become one of the fastest-growing D&O liability categories. The failure of boards to adequately test, audit, or govern AI models — to minimise risks of algorithmic bias and IP infringement — has become an emerging errors and omissions (E&O) and D&O intersection.
The most prominent example: Oddity, a cosmetics company that faced a securities lawsuit alleging its AI technology was "nothing but a questionnaire." This "AI washing" case — where companies overstate their AI capabilities to investors — has opened a new front in securities litigation. Boards that approve marketing materials and investor communications containing AI claims are now on the hook for the accuracy of those claims under securities laws.
AI governance is no longer optional for serious boards. A structured approach — documented AI risk assessments, board-level AI oversight, regular reviews of AI tool limitations — is both a governance best practice and a D&O liability management strategy.
Geopolitical Risk and Sanctions Compliance
Exclusions will tighten due to ongoing global conflicts in places like Europe, the Middle East, and Asia. This geopolitical component is forcing carriers to refine or impose stricter War and Sanctions exclusions in D&O policies. Directors could face personal liability if the company fails to properly screen transactions, leading to inadvertent violations of international sanctions regimes.
Directors of companies with global operations — or even those with supply chains touching sanctioned regions — bear increasing responsibility for sanctions compliance. The consequence of getting it wrong goes beyond D&O claims: criminal liability, regulatory debarment, and reputational harm can follow. D&O programmes must be reviewed for the scope of War and Sanctions exclusions, and boards must ensure the company has adequate sanctions compliance infrastructure in place.
Insolvency and Financial Distress
Financial distress is now the top indicator for future D&O claims, which is why underwriters will apply extreme scrutiny to balance sheets and debt loads. This is in part due to rising bankruptcies, but also the consequence of an environment where price surges due to tariffs might seem like a revenue increase on paper.
Creditors, trustees, and shareholders in insolvent companies pursue directors aggressively. Decisions made in the zone of insolvency — when a company is financially distressed but not yet formally insolvent — attract particular scrutiny. Directors who continued to trade while insolvent, who paid related-party debts ahead of third-party creditors, or who approved transactions that benefited insiders at the expense of the company face personal liability in insolvency proceedings on both sides of the Atlantic. UK wrongful trading provisions under the Insolvency Act 1986 and the US fraudulent conveyance framework both create pathways to director liability that D&O programmes must address.
ESG and DEI Exposure
Environmental, Social, and Governance (ESG) issues continue to dominate boardroom discussions. Shareholders, regulators, and investors are demanding greater accountability in climate reporting, diversity metrics, and sustainability commitments. Misstatements or failures to follow through on ESG goals can trigger claims of misrepresentation or breach of fiduciary duty.
The irony of the current moment is that boards face D&O exposure from both directions on ESG and DEI. Progressive shareholders file suits when companies fail to meet stated ESG commitments. Conservative investors and some regulators challenge ESG commitments as misallocations of capital or violations of fiduciary duty. Boards cannot satisfy both simultaneously — but they can protect themselves by ensuring that public ESG and DEI commitments are realistic, documented, and aligned with corporate strategy, and that the board's oversight role is clearly recorded in governance documents.
Cyber Risk at the Board Level
Cyber liability risks for directors and officers have risen sharply in recent years with higher expectations for board-level oversight of cybersecurity and a trend toward more litigation and regulatory actions. Claims against directors have been triggered by a wide range of events, including data breaches, ransomware attacks, and even technical glitches.
The SolarWinds securities case established the legal framework: a company that suffered a major cyberattack, and whose directors had allegedly made materially misleading statements about the company's cybersecurity posture, faced shareholder litigation under securities law. The SEC's 2024 cybersecurity disclosure rules — requiring disclosure of material cyber incidents within four business days — mean that boards are now directly accountable for both the security posture itself and the accuracy of public statements about it.
D&O and cyber insurance should work together, not operate in silos. Boards should review both policies with an eye to how they interact when a cyber incident gives rise to a securities claim.
The 2026 D&O Market — A Buyer's Window with Caveats
The D&O marketplace appears to have transitioned into a buyer-favourable, soft market phase for many insureds. Public company D&O programmes continue to see competitive pricing and broader capacity at upper layers. At the same time, primary layers, distressed risks, and sectors with elevated securities exposure remain subject to disciplined underwriting.
For D&O liability insurance, 2025 was a year of market transition. While markets remained competitive, the abundance of capacity that had been persistent for the past several years was somewhat more constricted, creating pressures toward rate stabilisation.
This buyer's market is directly juxtaposed with the highest risk environment for directors and officers for the first time in a decade, meaning that the tides could be changing. The practical implication: 2026 is a favourable moment to build programme quality — securing better coverage terms, broader definitions, and reduced exclusions — even if premium savings are modest. Locking in strong programme terms now, before the inevitable hard market cycle returns, is the strategic priority.
Where insurers may be less agreeable to more favourable pricing, they should be pressed to differentiate their offerings with other areas of value, such as enhanced coverage — including the addition of entity investigations costs coverage and increased sub-limits where feasible.
What Drives D&O Premium in 2026
D&O is underwritten more like a credit decision than a commodity purchase. Private companies with clean financials and limited litigation exposure may see more competitive terms than higher-risk organisations, even at similar revenue levels.
The key factors influencing your D&O premium:
Company size and revenue: Larger companies carry more complex risk and more potential claimants. Revenue is the primary scaling factor for premium.
Public vs. private vs. nonprofit: Public companies face securities class actions that private companies do not. This makes public company D&O significantly more expensive. Private company programmes focus more on employment and creditor claims. Nonprofit D&O is typically the most affordable tier.
Financial health: Underwriters scrutinise balance sheets and debt levels with increasing rigour. Companies with significant leverage, recent losses, or indications of financial stress pay more — sometimes substantially more.
Industry: Technology, healthcare, financial services, and cannabis sectors attract the highest rates due to elevated litigation frequency. Manufacturing and professional services typically attract more moderate pricing.
Governance quality: Board composition, independent director ratios, audit and compensation committee structure, documented governance processes, and the existence of a formal risk management framework all influence underwriting assessment and, increasingly, pricing.
Claims history: Prior D&O claims — particularly securities class actions or regulatory investigations — significantly impact future pricing and can affect coverage availability for affected insureds.
Best D&O Insurance Providers in 2026
Chubb — Best Overall for Publicly Traded Companies
Chubb offers one of the market's most comprehensive D&O programmes, with particular strength in public company coverage where Side C entity exposure is highest. Chubb's financial strength (A++ rating), depth of claims experience, and broad policy language make it the benchmark programme for larger public companies. Chubb's dedicated management liability underwriting teams provide sophisticated programme analysis rather than commodity placement.
AIG (Lexington Insurance) — Best for Large and Complex Programmes
AIG's management liability division offers significant capacity for large-limit D&O programmes and has deep experience with securities class actions. AIG's global infrastructure supports multinational companies with operations across multiple jurisdictions. For large-cap public companies requiring substantial tower capacity, AIG is frequently among the leading markets.
Berkshire Hathaway Specialty Insurance (BHSI) — Best for Mid-Market Companies
BHSI has become one of the most respected D&O markets for mid-market private and public companies, combining the financial strength of the Berkshire platform with competitive underwriting. BHSI's willingness to offer broad coverage terms and their consistent approach to claims handling have built strong broker relationships. For private and public companies in the $50 million to $1 billion revenue range, BHSI often provides the best combination of coverage quality and competitive pricing.
Travelers — Best Entry-Level D&O for Small Private Companies
Travelers offers manageable, right-sized D&O coverage for small private companies and nonprofits — often packaged alongside employment practices liability and crime coverage for cost efficiency. For companies in the early growth stage or nonprofits seeking baseline protection for their board, Travelers' combined management liability packages offer good value.
Beazley (Lloyd's of London) — Best for Specialist and High-Risk Sectors
Beazley's management liability team has deep expertise in technology, life sciences, and financial services — sectors where D&O exposure is most complex. For companies operating in highly regulated industries or those facing elevated litigation risks, Beazley's specialist underwriting and responsive claims team provide tailored protection that generalist markets often can't match.
Building the Right D&O Programme — Practical Steps
Conduct an annual policy review against current risk exposures. The risk environment has changed materially in the past two years. AI governance obligations, new ESG reporting requirements, sanctions complexity, and the evolving insolvency landscape all create new D&O exposure that standard policy language may not address. Annual review with an experienced broker is not optional — it is the minimum.
Negotiate coverage enhancements in the current soft market. Where insurers may be less agreeable to more favourable pricing, they should be pressed to differentiate their offerings with other areas of value — enhanced coverage, tightened exclusions, entity investigations costs coverage, broadened definitions of "insured person," and narrower exclusion lead-ins. Use the soft market to build programme quality.
Ensure Side A limits are adequate. Side A coverage is the last line of protection for individual directors when corporate indemnification fails. Sub-limits that made sense five years ago may be inadequate today. Review the adequacy of Side A limits explicitly.
Address the cyber-D&O intersection. Review both cyber and D&O policies with a broker who understands how they interact. Ensure that a cyber incident giving rise to securities claims — the scenario that SolarWinds crystallised — is covered by a clear, non-conflicting combination of the two policies.
Document governance processes. The best D&O defence is often not a legal argument — it is a governance record showing that directors applied a diligent, informed process to the decisions being challenged. Board minutes, committee charters, documented risk management processes, and recorded reliance on expert advice all build the evidentiary foundation that reduces both claim exposure and claim severity.
Frequently Asked Questions
Q1: Does D&O insurance protect directors from personal liability?
A1: Yes — D&O insurance is specifically designed to protect individual directors and officers from personal financial exposure when they are sued for how they managed the company. Side A coverage pays defence costs and settlements directly to individual directors when the company cannot or will not indemnify them. This protection extends to claims filed after a director has left the board, provided the coverage was in place during their tenure. Without D&O insurance, directors face claims with their personal assets — including personal savings, real estate, and investment portfolios — directly at risk.
Q2: What is the difference between D&O insurance and general liability insurance?
A2: General liability insurance covers bodily injury and property damage claims — it protects against physical harm caused by your business operations. D&O insurance covers financial harm caused by management decisions — it protects against claims that directors and officers made bad choices, misleading statements, or failed to meet their fiduciary obligations. A customer injured on your premises is a general liability claim. A shareholder suing your board for approving a bad acquisition is a D&O claim. The two policies address entirely different categories of risk and are both typically essential for incorporated businesses.
Q3: Do private companies need D&O insurance?
A3: Absolutely. The misconception that D&O insurance is only for publicly traded companies is one of the most expensive misunderstandings in risk management. Private companies face D&O claims from shareholders (including minority investors and venture capital backers), employees, customers, creditors, and regulatory bodies. Employment-related claims — wrongful termination, discrimination, harassment by executives — are among the most common D&O claims against private companies. In the event of financial distress or insolvency, creditors and trustees pursue director decisions aggressively. Venture-backed companies face particular exposure from investor suits when things don't go as planned.
Q4: What is "AI washing" and why is it a D&O risk?
A4: AI washing refers to companies overstating or misrepresenting their AI capabilities to investors, customers, or regulators. In a securities context, boards that approve public statements — in earnings calls, SEC filings, or investor presentations — containing inflated or inaccurate claims about AI capabilities face securities fraud exposure. The Oddity cosmetics case illustrates the risk: a lawsuit alleged their marketed AI technology was significantly less sophisticated than presented. Directors who signed off on misleading AI disclosures are potential defendants in the resulting securities class action. In 2026, boards should treat AI capability disclosures with the same rigour applied to any material financial statement — because the litigation risk is real and growing.
Q5: How much D&O insurance does a private company need?
A5: The right limit depends on company size, industry, ownership structure, and risk profile. As a starting benchmark: companies with less than $25 million in revenue typically start with $1 million to $5 million in coverage. Mid-market private companies between $25 million and $250 million in revenue generally carry $5 million to $25 million. Venture-backed companies and those with complex investor structures often need $10 million to $25 million even at earlier stages due to investor-side litigation exposure. The question is not just "what is the minimum" but "what is the likely cost of a full defence in our most probable claim scenario" — D&O claims regularly generate defence costs well into the millions before any settlement is reached. Benchmark your limits against that realistic claim cost, not against premium minimisation.
Conclusion
The boardroom in 2026 operates in one of the most complex liability environments in modern corporate history. AI governance obligations, geopolitical and sanctions exposure, ESG accountability pressures pulling in opposite directions, the rising tide of insolvencies, and cyber risk reaching board-level scrutiny — the list of issues that can generate a D&O claim has never been longer.
Companies that invest in governance, disclosure, and robust programmes will be best positioned to secure favourable terms and ensure that D&O insurance performs when it is most needed. The soft market conditions of 2026 create a genuine window to build programme quality — broader coverage, stronger Side A protection, and reduced exclusions — before the next hard market cycle arrives.
D&O insurance doesn't prevent litigation. But it means that when litigation comes — and in today's environment, for most significant businesses, it will — the financial consequences don't reach the personal balance sheets of the people who chose to lead.
Disclaimer: This article is for informational purposes only and does not constitute legal or insurance advice. D&O coverage terms vary significantly by insurer and programme design. Please consult a qualified management liability insurance broker and legal counsel for advice specific to your company and jurisdiction.
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