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Article | FINEX Observer

Directors and officers (D&O) liability: 2023 in review and a look ahead to 2024

By John M. Orr and Lawrence Fine | January 10, 2024

A look back at the directors and officers (D&O) liability market and our perspective on what to expect in 2024.

For D&O liability insurance, 2023 represented a year of ongoing market improvement. The availability of abundant capacity continued to drive competitive market dynamics. While we anticipate this will lead to ongoing rate decreases as we lean into 2024, we expect a deceleration of further decreases for many risks, especially those that had experienced material premium relief in previous renewal cycles.

Factors that are likely to exert positive and negative impacts on the market in 2024 include an enduring abundance of insurance capacity combatting pressures from D&O markets for rate stabilization, as well as positive economic indicators tempered by persistent interest rate and inflation concerns. Additional uncertainties include global tensions and increased bankruptcy filings, among other factors.

With that as a backdrop, we recap select D&O liability and market issues of 2023 below and then look ahead to the environment of 2024.

2023: The year in review

Alignment of legal protections and exposures for corporate officers and directors: In 2022, the Delaware General Corporations Law was amended to permit Delaware corporations to provide officers with exculpation protections for personal monetary damages resulting from a breach of fiduciary duty in certain forms of litigation. The modification had addressed a previous discrepancy wherein corporate directors could be exculpated from certain breaches of duty, but corporate officers could not.

Consistent with this reasoning, in January 2023, the Delaware Court of Chancery held in In re McDonald's Corporation Stockholder Derivative Litigation that the Caremark duty of oversight extends to corporate officers as well as directors. The decision was a not-unexpected step towards reconciling the duties and defenses of officers with those of directors. We discussed these issues, including the McDonald’s decision and related D&O coverage issues, in our article “Courts and legislatures remove liability distinctions between officers and directors.”

SEC cybersecurity rules/impact on coverage for CISOs: On the heels of the SEC announcing policies in March designed to protect the financial system against cyber incidents, the commission adopted rules in July to require all public companies to disclose all cyber security breaches within four days after a registrant determines that a cybersecurity incident is material. Where the SEC is involved, there are always risks to corporations and their directors and officers which may attract coverage under D&O policies.

In addition, recent focus has been drawn to coverage under D&O policies for companies’ Chief Information Security Officer (including functional equivalent titles such as Chief Technology Officer or Chief Privacy Officer, among others) and, specifically, whether such individuals qualify as “Officers” or “Executives” under D&O policy wordings. In November, we examined this subject in our article “Are CISOs protected?

Compensation clawback: In October 2022, the SEC approved final rules implementing Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules directed national securities exchanges and associations to establish listing standards requiring registrants to implement “clawback” policies to recoup incentive-based compensation following a material restatement of financial disclosures. In 2023, colleagues in WTW’s Executive Compensation practice issued commentary on the rules, including guidance surrounding clawback policy drafting and implementation. See the series “Dodd-Frank clawback” “1 in the series,” “2 in the series,” and “3 in the series.” See, also, “Tips for drafting a clawback policy to protect against future risks,” and “DOJ memo complicates decisions on Dodd-Frank clawback adoption.”

Stabilization of securities class action (SCA) filings: As of this writing, SCA filings in 2023 are on pace to total 216 filings, which approximates the average annual number of filings in 2021 and 2022. Also, despite a significant decrease from record high filings between 2017 and 2019, filing frequency in the past three years is in line with historic norms (232 annual average since adoption of the Private Securities Litigation Reform Act in 1996).

We included a discussion of the 2023 SCA landscape in our April publication “Insurance Marketplace Realities 2023, Spring Update,” as well as our November publication “Insurance Marketplace Realities 2024.”

Directors and officers voiced their most significant risk concerns: We have a better understanding of D&O risk not just from market trends and leading legal authority, but also from the perception of risk by the very directors, officers, and risk managers who are most impacted. In our 10th Annual Directors and Officers Liability Survey, published in March, we surveyed corporate officials globally to determine their top risk concerns. Consistent with our survey results in 2022, the top risks to directors and officers identified by North America survey respondents reflected cyber-related concerns.

A summary of our 2023 survey, along with commentary around its results, was published in our article, “Directors and Officers Liability Survey 2023.” We also published “Regional Overview, North America – Directors and Officers Survey 2023,” as well as our guest post in Kevin LaCroix’s D&O Diary, entitled “Guest Post: What has You Worried? Notes from WTW’s 2023 D&O Survey.”

2024: Looking ahead

Underwriting: the D&O liability insurance market is likely to remain stable into 2024: Through Q3 2023, we experienced flattened-to-reduced premium outcomes. Looking ahead to 2024, we expect to see continued decreases but with a leveling off of further decreases for many risks. In this regard, markets have communicated a need for rate stabilization, yet robust capacity continues to generate persistent competitive market dynamics. This appears to be the case for primary, excess, and Side A layers across both private and public company books. The extent of decrease or, alternatively, the scope of rate deceleration is likely to depend on whether organizations had experienced material premium relief in previous renewal cycles.

Broader economic influences: Recovery from the pandemic yielded growth in GDP, corporate profits, employment and wages. Importantly, more recent fears of a recession appear to have tapered; however, D&O underwriters remain concerned with uncertainties arising from higher interest rates, inflation, global hostilities, among other factors.

ESG pressures and backlash: Organizations continue to face pressures to address ESG from operational, cultural and investment perspectives. The SEC proposed rules around climate exposure disclosures for public companies in 2022 but, in light of significant negative feedback, we do not expect these rules to become final as drafted or without significant litigation challenge. In the meantime, at least two telephone service providers were sued in ESG-related securities class actions. At issue: alleged misrepresentations relating to lead contained in telephone cables.

In addition, anti-ESG backlash at state and federal levels has presented conflicting pressures relating both to climate and to diversity, equity and inclusion. Such backlash has included not just legislative efforts to restrict companies from implementing ESG protocols, but also shareholder proposals to limit ESG policies and shareholder litigation.

Bankruptcy/insolvency: Chapter 11 bankruptcy filings totaling 6,473 through the year ending 2023 (September 30) reflected a 36% increase year over year (although 21% lower than 2020 filings and 12% lower than 2019 filings). With government subsidies and lending programs related to the pandemic mostly phased out, in addition to higher inflation and tightened monetary policies, increased filings remains a distinct possibility going forward. We continue to monitor these developments, as bankruptcy claims, which impact both private and public companies, can be among the most severe.

Supreme Court to review SEC authority to conduct administrative proceedings: In June 2023, the U.S. Supreme Court agreed to review litigation that assesses the constitutionality of the SEC’s use of in-house administrative tribunals. In the case of Jarkesy, et al. v. Securities and Exchange Commission, the Fifth Circuit held that the asserted power of the SEC to conduct administrative proceedings before administrative law judges, as opposed to bringing actions in federal court, was unconstitutional. If the Supreme Court affirms, the decision has the potential to fundamentally change the way SEC enforcement actions, and administrative agency proceedings in general, are conducted. Oral argument before the Court occurred on November 29. An opinion is anticipated before the close of the Court’s term in June 2024.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).


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