The rising demand for Directors & Officers (D&O) insurance

D&O insurance is becoming more important as business leaders face bigger legal and financial challenges. Stricter regulations, more claims being upheld, and the growing complexity of companies mean this cover is essential. Without it, directors could be personally on the hook, risking their finances, assets, and careers. The 2025 Global Law Connect report, with insights from 24 GILC member firms, highlights these challenges and the rising global demand for D&O cover.

More claims, more accountability

In the last five years, 61% of businesses have seen a rise in D&O claims, and over half say courts and regulators are more ready to hold directors personally responsible. As the focus on corporate governance grows, leaders are under more pressure to be accountable. This isn’t just about big companies – directors in businesses of all sizes find themselves having to stand up and defend their decisions.

What directors need to know about D&O insurance in 2025

As the corporate landscape evolves, directors must regularly review and understand their D&O insurance policies to make sure they are properly protected against silent and emerging risks. Insurers are updating policies to protect against new kinds of liabilities as financial, geopolitical, and technology exposures grow. The demand for clear, all-around protection for directors is only set to increase. Updates are not always a good thing. Historical silent exposures are now being defined, which could limit or restrict cover, moving the needle away from the primary intention.

Reviewing coverage

Check your D&O insurance policy regularly to ensure it still aligns with today’s legislation and risks. Things move quickly; what was acceptable in the years prior might not be sufficient now. Take the time to understand what’s covered and ensure policy limits and structures are appropriate for the risks you’re likely to face. D&O policies may be stand-alone or cover may be packaged within other products that have interlocking or aggregated limits. Prudent directors should work with their advisors to understand any benefits and/or implications of such arrangements.

Understanding exclusions

Not everything is covered under a D&O policy, and you need to know what’s left out. Pollution or cyber issues can often be restricted or excluded (even defence costs), which could leave you personally exposed in the absence of any Deeds of Indemnity & Releases. Taking the time to check the fine print with your insurance broker can help avoid issues if your policy is tested. D&O policies (and entity cover) are not attritional claim-triggering policies but rather have the potential for low-frequency, large-vertical losses, which can be crippling if not adequately transferred to an appropriate insurer and/or policy.

Regulatory shifts in Australia

Australia’s Financial Accountability Regime (FAR) is shaking up corporate regulation. From 15 March 2025, directors and executives will face tougher rules, with more scrutiny, bigger penalties, and higher legal costs. FAR now covers insurance and superannuation as well, meaning more people and businesses are in the spotlight.

Under the new rules, directors and senior executives will need to:

Formalise their responsibilities through accountability statements.
Identify and register key functions within their organisations.

Growing business risks

On top of regulatory changes, directors are dealing with new challenges like economic uncertainty, cyber risks, and growing demands from shareholders, employees, and customers for more transparency. If businesses don’t meet these expectations, legal action can follow. Without acceptable D&O coverage, directors might end up personally responsible for expensive claims, fines, defence costs, or settlements.

As the business world keeps changing, protecting leadership from personal liability is becoming more important than ever.

How the D&O insurance market is evolving in 2025

The D&O insurance market is changing at a rapid rate. What used to be a fairly narrow product focused on financial mismanagement is now adapting to cover a wider range of risks. As businesses evolve, so do their insurance needs—and the policies are starting to reflect that.

So, what does that mean for clients?

Alan Moran, General Manager at Austcover, points out two key things.

“First, assuming all else is equal, rates, correlating to premiums have started to come down. Second, policy conditions are starting to ease. That might mean access to higher limits, discussions around reducing excesses or more flexible contract terms that are easier to navigate.

We’re also seeing movement on some of the stricter exclusions. For instance, certain policies are now relaxing terms that previously excluded cover for allegations of trading while insolvent under the Corporations Act.”

Insolvencies and director liability

With insolvencies on the rise, directors are increasingly at risk of being held personally responsible for financial decisions that lead to a business failing. The Australian Financial Security Authority forecasts a 15% jump in personal insolvencies for 2024–25, reaching about 13,400 cases, and that number is expected to climb another 11% to nearly 15,000 in 2025–26. It was also reported that the construction sector saw the highest number of insolvencies, with a 14.4% increase from the previous year. This surge is linked to factors like tighter ESG rules, rising construction costs, and labour shortages. Carriers take different positions regarding insolvency exclusions and/or write-backs in covers. It’s important to know and fully understand these positions under coverage.

These figures show why having appropriate D&O insurance is more important than ever, to help protect directors from the legal and financial fallout arising from insolvency claims.

Cybersecurity and ESG

One of the key shifts in the D&O insurance market is the growing emphasis on cybersecurity and environmental, social and governance (ESG) risks. A report from cybersecurity firm Check Point Software Technologies found a 44% increase in cyberattacks globally in 2024, with Australia ranking as the sixth most targeted country by bad actors. With the rise in cyberattacks, directors face increasing scrutiny over data security and risk management. With threats like these on the rise, directors are under more pressure than ever to show they’re on top of data security and risk management. Insurers are updating policies to keep up with these changes, so it’s a good idea to check in with your provider to make sure your coverage is still fit-for-purpose.

Additionally, ESG considerations are becoming increasingly significant. Regulators, investors, and consumers expect companies to be transparent and responsible, especially in industries with a big environmental footprint such as mining, manufacturing, and construction. Directors can be held personally responsible for corporate reporting, disclosure/non-disclosure and communication. In certain instances, policies may even exclude pollution-related claims, underscoring the critical importance of maintaining ESG compliance—not only at the operational level but across the entire supply chain.

Artificial Intelligence (AI) and “AI Washing”

A CSIRO 2023 report showed that 68% of Australian businesses were already using AI technologies, with another 23% planning to jump on board within a year. Considering the rapid pace of AI advancement, those figures are likely even higher today.

The increasing accessibility of AI introduces new risks, particularly related to ‘AI washing’—the practice of overstating the capabilities of AI technologies. It is essential for directors to communicate AI-related claims with clarity and integrity to avoid misleading stakeholders and regulatory bodies. Failure to manage AI responsibly could result in legal consequences and significant reputational harm.

Staying ahead of emerging risks with Austcover

The Directors and Officers (D&O) insurance market is evolving to address emerging risks such as cyber threats, ESG considerations, and economic volatility—challenges that are increasingly impacting corporate leadership. As regulatory frameworks tighten and personal accountability grows, it is essential for directors to remain informed and ensure their coverage adequately reflects these shifting risk landscapes.

To ensure adequate protection, directors should regularly review their coverage, understand any exclusions, and proactively manage potential risks before they escalate. Having the right D&O insurance in place safeguards both personal and professional interests in today’s rapidly evolving business environment.

As the D&O landscape grows increasingly complex, Austcover is here to support you in navigating these emerging risks. Our tailored insurance solutions and access to both local and global markets provide your leadership team with the comprehensive protection it needs.

Navigating Risk in Today’s D&O Insurance Market

Key Takeaways