Stable conditions, rising risk

That pace puts enforcement activity well behind fiscal year 2025, when a total of 56 actions were initiated, with only three of those actions initiated during the second half of the fiscal year. The SEC’s priorities have also evolved, particularly in its focus on punishing individual executives for wrongdoing.

This posture makes Side A D&O24 coverage more critical, while the relevance of Side C coverage for corporate penalties may diminish.

The SEC has also proposed allowing public companies to report earnings twice a year rather than quarterly. Proponents have described the proposal as a way to reduce regulatory burdens and to encourage more private companies to go public.

The rule, if enacted, could increase certain risks for public companies that switch to semiannual reporting. Less frequent disclosures will face heightened scrutiny from shareholders and plaintiffs’ attorneys. Longer blackout periods on stock trades by company insiders could also invite skepticism from shareholders and regulators on buying and selling activity by company directors.

Through May 2026, plaintiffs had filed 92 securities class-action lawsuits in federal courts, according to Stanford Securities Litigation Analytics. This is slightly ahead of the pace of 2025, when plaintiffs filed 91 suits through May.

Claims related to private credit have accelerated as the $2 trillion industry faces tough questions about risk-taking and redemption limits. Private credit litigation stems from two sources:

• The bankruptcies of businesses that accepted loans from private credit funds.
• Claims from investors that private credit funds extended loans to risky companies without proper due diligence. As private credit continues its rapid growth and spreads across institutional portfolios, the litigation risk embedded in the asset class is becoming a more prominent D&O concern.

Private D&O buyers are finding mostly flat premiums, except in certain instances of upward pressure when claims activity, increases in exposure, or deteriorating financials necessitate slightly higher pricing.

Capacity remains steady, with no new or departing carriers. This means existing carriers compete for business, leaving pricing largely uniform across the private market. As a result, coverage is broad and widely available, with exceptions for exposures to antitrust or regulatory claims.

Underwriters are increasingly taking insureds’ financial health into account.

Business bankruptcies increased in 2025 to 24,737 filings, up 7% from the previous year, according to the Administrative Office of the U.S. Courts. Financial distress has pushed businesses looking to avoid bankruptcy toward out-of-court arrangements, such as debt-to-equity swaps and lender takeovers. These transactions may trigger change-of-control provisions in private D&O policies, so companies considering such avenues should ideally consult their insurance brokers before entering into them.

Underwriters are also expressing broad concern about companies that derive 20% or more of their revenue from government contracts or grants, given the uncertainty around federal spending priorities and the potential for rapid contract terminations or program eliminations. Companies in this category should expect more detailed underwriting scrutiny and, in some cases, more restrictive terms at renewal.

The crime market remains stable and moderately competitive despite carriers continuing to see a high frequency of loss activity. Most buyers are renewing crime insurance programs flat to slightly down.

Backed by strong results and capital positions, insurers are showing greater appetite for crime. Capacity remains ample due to favorable historical loss ratios and relative profitability compared with other specialty lines. Insurers are eager to grow their portfolios through competition.

Insurers are concerned about the growing severity of social engineering fraud (SEF)25 and business email compromise26 losses, which remain the dominant loss driver in the market. External fraud has overtaken internal fraud as the leading driver of losses, measured by both frequency and severity, and is increasingly AI- and technology-enabled, scalable, and difficult for companies to detect.

Deepfakes, voice cloning, account takeover, and phishing attacks are growing rapidly. We are also seeing a resurgence of physical check fraud, a low-tech threat that has returned as organizations strengthen electronic payment controls.

Conditions are more difficult for financial institutions, which account for roughly 40% of crime claims globally. In 2025, 1 in 5 financial institutions reported $5 million or more in fraud losses; financial firms are also subject to intense regulatory scrutiny and are more exposed to systemic fraud trends given the volume of transactions they process. Meanwhile, midsize organizations face greater rate volatility due to weaker controls and their greater susceptibility to SEF losses.

Insurers are being more selective on program structures and deductibles/attachment points. They are closely scrutinizing insureds’ SEF controls, including procedures related to callbacks, dual authorization, and funds transfer and payment verification. Insurers are also paying close attention to whether documented procedures are being followed in practice.

Full limit SEF coverage and favorable funds transfer provisions are becoming more difficult to secure given recent loss activity. Carriers are narrowing definitions of covered fraud triggers, tightening clauses related to failure to follow procedures, and clarifying language related to cryptocurrency and AI-enabled impersonation.

Carriers, however, are offering expanded stand-alone and excess SEF products, along with blended cyber and crime solutions with difference-in-conditions/difference-in-limits provisions. We are seeing higher limit structures for SEF where companies have strong controls.

We continue to see disputes over coverage intent. One pending lawsuit related to a funds transfer loss centers on whether a township selling municipal bonds to a financial institution meets the definition of “vendor” for purposes of funds transfer fraud. Under the primary policy in question, vendors must provide “goods and services” for a fee to insureds; the primary carrier agreed the bonds met the definition of goods and services, but the excess carrier disagreed. This illustrates the growing importance of precise policy language and the need to scrutinize coverage terms before any losses occur.