Howden Re has published a new whitepaper examining the changing nature of securities litigation and its impact on Directors and Officers (D&O) insurance. The report, titled "The Shifting Sands of Securities Litigation: Impact of Event-Driven Litigation on D&O Insurers," focuses on trends in the U.S. market.
The whitepaper notes a shift from traditional lawsuits centered on accounting issues to an increase in cases related to non-financial operational risks. These include events such as wildfires, data breaches, public health crises, and product failures. According to Howden Re, these types of incidents are now central to claims patterns and settlement trends for D&O insurers.
Brian Turner, Managing Director at Howden Re, said: “To protect clients and shareholders, insurers must anticipate how governance, business risk and operational failures intersect with securities claims. 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.”
Event-driven litigation is described in the whitepaper as cases where consumers, employees, competitors or the general public are primary victims rather than shareholders. Examples cited include opioid litigation against healthcare distributors, safety failures like the Boeing 737 Max crashes and PG&E wildfires, workplace misconduct highlighted by #MeToo cases, and regulatory scandals involving companies such as Wells Fargo and Goldman Sachs.
Over the past 25 years, there has been a decline in accounting-related securities class action filings due to regulatory reforms. In contrast, non-accounting claims have doubled over the last decade. Cases tied to missed earnings reports, failed product launches or regulatory actions now make up most new filings. Despite some cases appearing weak initially, dismissal rates remain steady at about 50%, meaning many continue through court proceedings with associated legal costs.
Another trend identified is a rise in breach of fiduciary duty claims—often filed as derivative suits—which now exceed 100 annually. These are frequently brought alongside federal securities class actions and can increase pressure for settlements while bypassing certain federal tort reform laws.
Insurers are responding by diversifying their portfolios—reducing maximum line sizes and aggregations across products—and adjusting attachment points for pricing relative to risk. Some carriers are also expanding into adjacent segments like Private/Non-Profit D&O coverage to balance results amid low cyclical pricing for D&O insurance.
Turner concluded: “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.”