The directors and officers' (D&O) insurance market in Australia has experienced a positive shift for 2025, offering more opportunities for well-managed businesses to protect their boards and senior managers, as noted in the Gallagher Global Market Update.
By staying informed about these developments, Australian businesses can better navigate the D&O insurance market and secure the most suitable coverage for their needs.
This shift is largely driven by increased competition, particularly from offshore insurance markets, prompting Australian insurers to reassess their risk rating criteria to remain competitive with their insurance offerings.
Additionally, new capacity in the London insurance market and the establishment of local offices by global insurance companies in Australia have contributed to this changing landscape.
Underwriters are actively reassessing premiums and risks, showing greater interest in lower layers of insurance programs with higher premiums — challenging the cost structures previously determined by increased limit factors set by insurers.
Businesses that previously removed or reduced their Side C cover for company securities risks are now reconsidering their insurance strategies and taking advantage of insurers' preparedness to amend limits, sub-limits, unfavourable terms or retention levels.
Key trends influencing D&O insurance demand
Company boards are increasingly concerned about new legislation or changes in regulations and recent class actions.
For instance, new mandatory climate reporting obligations require large Australian organisations to make climate-related financial disclosures in their annual reports, starting from January 20251. While the legislation contains a modified liability regime, there is no liability period for criminal actions and continuous disclosure laws sit outside of the regime.
Net zero targets are subject to scrutiny, with an activist group challenging a large Australian company in court, alleging it had made misleading claims about its ability to achieve net zero emissions by a specified period. The activist group alleges that the company lacks evidence or data to back up their targets.
Technology and transparency about the use of artificial intelligence (AI) is another risk exposure which should be managed carefully by directors and senior managers as regulatory actions overseas have targeted companies and boards for misleading statements about the use of AI or AI-washing.
Workplace health and safety actions brought by employees against businesses and their directors have also risen. The increasing cost of defending claims (both legal defence and compensation) due to inflation means businesses should review and adjust their indemnity limits accordingly.
External factors too, such as geopolitical issues and their impact on supply chains and customers present significant risks for businesses and their directors.
While we are currently experiencing a decline in new class action filings, shareholder claims persist, particularly in security class actions. These cases are expanding to include issues like cyber security risk disclosure, with a recent emphasis on plaintiffs needing to establish proof of liability2.
A cautionary note for senior executives and managers
Strategic engagement with insurers critical to optimal D&O insurance outcomes
Selecting a suitable insurer depends on a number of factors including market competitiveness, attitude to risk and policy cover, insurer longevity and ownership structure, claims payment attitude and willingness to negotiate coverage, extensions and premium costs.
Businesses should be prepared to differentiate themselves to potential insurers while demonstrating awareness of corporate accountability, particularly in respect to the changing regulatory landscape, governance in key risk areas and stakeholder engagement. In addition to the needs of and duties to shareholders, this includes employees, customers, their supply chains and the community.
Boards must adapt to and keep pace with reforms by closely evaluating and reviewing risk management and governance across the organisation. In response to, many boards are establishing or strengthening dedicated committees, sub-committees and focus groups for key risks such as cyber, due diligence around the use of AI, money laundering and sustainability.
How Gallagher can help
Connect with us to request a professional and financial lines risk insurance consultation, quote or proposal to support evolving D&O exposures. Our insurance brokers have the expertise and experience to advise on leveraging new opportunities to optimise insurance coverage and risk mitigations.
