IPO revival reshapes pressures and opportunities for D&O insurers, says Howden Re

With event-driven litigation on the rise and IPO activity returning, D&O insurers face new dynamics. Howden Re’s Jim Walsh highlights the need for sharper tools to navigate them.

Key points:
Exposure growth outpaces falling rates
Plaintiff bar drives new litigation risk
$4bn premium leaves D&O market

After years of decline, the IPO market has finally come back to life, but with it, presents a double-edged sword for Directors and Officers (D&O) insurers.

As reinsurers gather in APCIA, professional lines leaders are weighing the impact of the busiest IPO market since 2021. For Jim Walsh, managing director and head of professional lines at Howden Re, the IPO revival is helping to temper the rate decreases for Directors and Officers (D&O) liability insurance. After several years of a soft D&O market characterized by lower premiums and abundant capacity, the resurgence of IPOs adds new, higher-risk business to the insurance market while derivative and event-driven claims highlight the need for disciplined underwriting. 

“There’s been around 250 IPOs to date, compared with over 1,000 during the SPAC (Special Purpose Acquisition Companies) explosion of 2021,” he told APCIA Today, adding that expectations of a bullish market had “put a pause on rate decreases” across D&O.

Walsh recalled that leading up to the January 2025 renewals, professional and financial lines faced evolving claims trends and a more demanding rating environment. By 1/1, however, there were hopes of stabilisation. “That allowed a number to renew in a very orderly fashion,” he explained.

Throughout the first 10 months of this year, the mix of a strengthening IPO pipeline, macroeconomic uncertainty and an increasingly creative plaintiff bar has lead to a stabilization of rates. “There’s a significant rise in derivative claim action as the plaintiff bar gets more and more creative, and insurers are finally pushing back,” Walsh observed. 

Event-driven litigation, especially around pharmaceuticals, immigration policy and regulatory change, has become a constant. Combined with “mega settlements and general deregulation”, the underwriting job has become more complex.

For Walsh, the widening gap between exposures and premiums is a central challenge. “When we think about elevated exposure growth, that’s market cap that has grown 67% from 2021 while rates have decreased 33%.

“The key topics for insurers and reinsurers will be how we are closing that gap, and what underwriters are doing to manage that exposure growth.”

A similar imbalance appears in D&O premium volumes. In 2021, the market saw $15 billion of premium, but since then, competition, a weakening IPO market and falling rates have reduced premiums by about $4 billion.  

That shrinking pool of premium, paired with rising exposures, and an unrelenting plaintiff bar, leaves reinsurers looking harder than ever at portfolio management and rate adequacy.

“Finding quality risk will be increasingly difficult, and the expert management liability teams able to identify it, will be the ones who stand out in the marketplace.”

As renewal season approaches, Walsh argued that reinsurers are looking for greater discipline. “The changing legal landscape is forcing D&O carriers to re-assess their underwriting strategy, consider new ways to model expected loss costs, take a closer look at Side A pricing, and place more emphasis on portfolio management to better insulate against major events and deliver profitability,” he said. 

While some carriers have stepped back, the trend highlights a broader ‘flight to quality’, where expertise and disciplined risk selection are becoming decisive advantages. Walsh noted: “Finding quality risk will be increasingly difficult, and the expert management liability teams that can truly identify that and get paid the proper price for that risk selection will be the ones who stand out in the marketplace.”

Howden Re is investing in solutions, from its new Public D&O Model to thought-leadership whitepapers, designed to help clients price risk with greater precision and confidence. Walsh said the firm had devoted significant resources to building its own Public D&O Model, which provides an independent view of risk and helps clients analyse portfolios across industry segments. 

“What we’re trying to do is help shine a light on the portfolio construction in terms of rate adequacy, mix of business, limits management and attachment points,” he said.

Alongside this, the company has just published a whitepaper titled ‘Shifting sands of security litigation’, focusing on the distinction between event-driven and non-event-driven litigation. Walsh sees this as essential context for underwriters trying to price risk in a market where exposures keep multiplying. “We’ve seen a significant increase in event-driven litigation, which again impacts Side A and has significantly increased the job of the underwriter in trying to assess the actual exposure of the risk,” he explained.

For Walsh, the longer-term picture is stark. He concluded: “Risk profiles for both public and private companies are evolving rapidly. For reinsurers and underwriters, the opportunity lies in adapting capacity strategies and embracing new tools that bring clarity to these shifting exposures.” 

In his view, reinsurers willing to partner with disciplined underwriting teams that utilize portfolio management tools will be best placed to manage evolving market conditions.  

Jim Walsh is managing director and head of professional lines at Howden Re. He can be contacted at: jim.walsh@howdenre.com

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