Aon: Management liability market remains stable in 2025 but 'underwriting red flags' emerging

By Mia MacGregor

March 24 - (The Insurer) - Management liability lines remain stable in 2025, but evolving technologies, rising litigation and macroeconomic factors could shift the claims landscape in directors and officers (D&O), employment practices liability (EPL), fiduciary liability, and crime and kidnap, ransom and extortion (KRE) lines, according to a new report from Aon.

The report said competition, capacity and stable markets are giving management liability clients a variety of positive options.

But it added that "rising claim frequency and severity, a challenging ESG landscape and the risk and rewards of artificial intelligence present potential underwriting red flags."

The report noted that D&O pricing remains stable for public companies, with rate decreases tapering off compared to last year. However, high-risk sectors like technology, life sciences and financial services may see rate increases due to heightened litigation and regulatory exposures.

For private and nonprofit organizations, the report stated that pricing is also steady, with slight decreases for companies with strong risk profiles. Large nonprofits, particularly in higher education and healthcare, are experiencing price increases.

Despite an oversupplied market with over $1 billion in available capacity, Aon noted that insurers are reassessing capacity deployment due to profitability concerns, while new entrants are struggling to gain market share.

The report also stated that claims frequency is rising in securities class actions and derivative lawsuits, with severity increasing in the derivative space.

“We don’t know how the change in administration will ultimately impact the D&O landscape, but what we do know is that everything a company does at the board level is increasingly being scrutinized,” said Adam Furmansky, deputy D&O product leader at Aon in the U.S.

“There are just more opportunities for D&O claims to be filed. It seems that as anything develops in the larger economy, it can lead to a source of claims.”

Underwriters are particularly focused on risks related to securities class actions, SEC investigations, anti-ESG sentiment, DEI initiatives, AI, cybersecurity disclosure, bankruptcies, and regulatory changes, according to the report.

To secure favorable underwriting terms, Aon stated that companies will need to demonstrate strong governance, transparent reporting and proactive risk management.

EPL MARKET

The EPL market remains competitive with ample capacity, though it is firming, according to the report. Increased claim frequency helped keep rates down in 2024, but Aon suggests this trend may shift.

“In the next year we may start seeing some pricing increases," said Tom Hams, EPL practice leader at Aon. "Similar to D&O, there is much capacity in the market with a lot of insurers interested in growing their books, and that has held pricing down, but the current negative claims trends in 2025 may send pricing toward at least small increases.”

The broker highlighted underwriting concerns including DEI initiatives, use of AI in hiring and expansion of pay transparency.

The Trump administration's recent executive orders may consider some DEI initiatives to be unlawful discriminatory programs that violate antidiscrimination laws and potentially impede merit-based opportunities.

Aon said this will have an impact on private businesses, as companies could face increased discrimination and harassment claims when adhering to the requirement to pull back on the DEI efforts. "Alternatively, there is concern that prior and future DEI initiatives could be at increased risk for resulting in reverse discrimination claims," it added.

FIDUCIARY LIABILITY

The fiduciary liability market remains stable, with insurers offering slight pricing reductions and adequate capacity. However, Aon noted that litigation outcomes could push rates higher.

“Insurers, in response to retirement plan excessive fee litigation, have managed the exposure through higher retentions that are applied either to excessive fee litigation specifically or to all mass or class actions,” said Jay Desjardins, fiduciary liability practice leader at Aon.

CRIME AND KRE

In the fidelity/crime insurance environment, Aon noted continued stability with insured demand for coverages remaining high.

Pricing has leveled out across the U.S., London and Bermuda markets. Robust coverage limits are available, provided that underwriters view the insured’s control environment favorably, according to the report.

Aon noted that underwriters continue to focus on historical risk factors, including financial strength, employee oversight and fraud prevention measures, as well as remote work, social engineering and AI-related risks.