The Shifting Sands of Securities Litigation Reshape the D&O Insurance Landscape

Howden Re has released its latest casualty whitepaper, The Shifting Sands of Securities Litigation: Impact of Event-Driven Litigation on D&O Insurers.

Focused on the U.S. market, the whitepaper highlights that, while traditionally lawsuits focused on accounting issues, this is now a growing prevalence of non-financial “operational risk” events, ranging from wildfires and data breaches to public health crises and product failures, that are driving securities litigation. These events, once peripheral to D&O exposure, have now become central to claims patterns and settlement trends.

“To protect clients and shareholders, insurers must anticipate how governance, business risk and operational failures intersect with securities claims,” said Brian Turner, Managing Director at Howden Re. “Insurers therefore must adapt by reassessing underwriting strategies, limiting exposures to high-risk accounts and maintaining sharper focus on portfolio construction to navigate this shifting landscape.”

Read the full article here

Event-Driven Litigation Takes Centre Stage

The whitepaper defines event-driven litigation as cases where the primary victims are not shareholders but consumers, employees, competitors, or the general public. Examples include:

• Public health crises: Opioid litigation against healthcare distributors
• Safety and product failures: Boeing 737 Max crashes, PG&E wildfires
• Workplace misconduct: #MeToo cases
• Regulatory and sales practice scandals: allegations of Wells Fargo’s aggressive or fraudulent sales tactics and Goldman Sachs’ bribery settlements

Once rare, large settlements in this category have become a defining feature of today’s litigation landscape.

Non-Accounting Claims on the Rise

Over the past 25 years, securities class action (SCA) filings have shifted away from accounting-related misstatements. Regulatory reforms curbed traditional accounting-related class actions, while in contrast, non-accounting claims have more than taken up the slack, doubling in the past decade. Today, cases linked to missed earnings, failed product launches or regulatory actions represent the majority of new filings.

While some of these cases may initially appear weak, dismissal rates have remained steady at around 50%. As a result, a significant proportion continue through the courts, contributing to elevated defence and settlement costs.

The Surge in Derivative Actions

One of the most significant shifts is the surge of breach of fiduciary duty claims, frequently in the form of derivate suits. Once rare, these cases now exceed 100 per year. Often brought in parallel with federal securities class actions, they can increase settlement pressure and sidestep federal tort reform laws intended to curb abusive litigation.

Implications for Insurers

The wave of event-driven claims is reshaping insurer behaviour:

• Portfolio diversification: Carriers are reining in limits, both in terms maximum line sizes as well as aggregations across products, such as Full D&O and Side A.
• Attachment strategies: Some carriers are lowering attachment points to capture stronger pricing relative to risk
• Market balance: Other carriers are expanding into adjacent segments such as Private/Non-Profit D&O to stabilise results.

With D&O pricing at cyclical lows, the ability to manage portfolios proactively is more important than ever.

Looking Ahead

For insurers, brokers and risk managers, the challenge in adapting to this structural shift in the D&O environment lies in anticipating litigation trends where governance failures, operational risks and social accountability converge.

Turner added: “Today’s D&O market demands foresight, resilience, and adaptability in underwriting strategies to navigate a litigation landscape where the next big event, not the next balance sheet restatement, may drive the largest losses.”