Mixed securities litigation trends and potential D&O implications

Favorable indicators, with some caveats

NERA’s annual report provides valuable insight into the landscape of securities class action litigation against publicly traded companies over the past year. Companies should monitor these trends, which highlight key risk areas that may warrant increased management attention and provide insight into what D&O insurance underwriters may focus on during upcoming renewals.

Despite securities class action risk not subsiding any time soon, 2025 produced several favorable indicators, including:

An 11% drop in securities claims

A materially heightened dismissal rate (62% compared to the 55% 10-year average)

A 9% decrease in the average settlement

A substantially diminished aggregate settlement amount — $2.9 billion, compared to $3.9 billion in 2024

A 3.5% decrease in the total amount of open claims, marking the lowest number of open claims in three years

The picture remains a mixed bag, however, as the median settlement increased by 21% in 2025 and the share of settlements between $21 million and $50 million was the largest in five years.

Nevertheless, these tailwinds could be an important backdrop in broader negotiations with insurers over both company-specific and macro risks. With more claims resolved than brought in 2025, an elevated dismissal rate, and a $1 billion drop in total settlements, 2025 is likely to have been a more favorable accident year for many insurers than the year prior.

Artificial intelligence litigation persists

Artificial intelligence (AI) remains a ubiquitous topic across the business world. Last year’s 17 AI-related securities class action suits — one more than in 2024 — represent 8% of all federal filings. As AI becomes more pervasive, and related risks evolve, executives must not only message how their organizations are adapting and applying AI solutions, but also how they expect to be impacted by competitors, new market entrants, and even fraudulent actors.

Many of the 33 AI-related securities class action suits filed over the past two years involved companies accused of misleading investors about their AI capabilities, with these so-called “AI washing” cases spanning across different industries and products. Shareholders also brought suits alleging that companies failed to disclose how competitors' or industry-adjacent organizations' AI deployments could impact profitability.

AI risks are top-of-mind for D&O underwriters, and they are considering ways to manage exposure to this risk. To present a positive risk profile, companies should consider outlining specific ways in which the board monitors AI risk and how they are messaging these issues to customers and investors in their renewal meetings. In recent years courts have commonly dismissed fiduciary breach of oversight lawsuits involving technology risks where boards maintain any form of monitoring framework, however imperfect.

Companies can also earn credibility with underwriters by outlining their broader compliance programs regarding AI-usage, both in products and services and as part of hiring and human resources management.

Missed earnings guidance and performance challenges

As expected, a large portion of securities claims involve a negative earnings result or missed guidance followed by a sharp stock drop, which accounted for 43% of cases. Because these events increase the chance of a securities claim, they often come under increased underwriter scrutiny.

That said, it is important to note that D&O insurance provides coverage for disclosure risk, and is not intended to effectively provide a business performance guarantee. Even companies with sharply negative investor reactions may have a low risk of a securities claim if they can establish that they were transparent about the risk that led to the disappointing results. It is therefore critical that during renewal meetings, organizations point out to consistent and clear communications with investors to mitigate D&O underwriters’ perceptions that a claim is likely — especially where the company is facing headwinds.

Macroeconomic risks can still lead to litigation

Shareholders also pursued claims relating to inflation, immigration issues, tariffs, and other headwinds to which many companies and industries are exposed. While the impact of these risks is broad, shareholders have brought suits alleging a lack of transparency about the potential impact of these risks. It is therefore important for companies to demonstrate to D&O underwriters that a reasonable investor would not be surprised by the result, even if they were disappointed.

Implications for both companies and underwriters

There are many factors that could impact D&O insurance coverage and pricing in any given year, including market conditions and competitiveness, individual underwriter appetite, insurer industry exposure, and claims activity. Companies should therefore focus on what they can control to achieve the best results. This includes presenting to D&O insurers a clear and differentiated risk profile by highlighting disclosure practices, governance and risk frameworks, and important compliance measures to address emerging risks.

For more information on how current securities litigations trends could impact your D&O program, contact your Marsh representative.

Mixed securities litigation trends and potential D&O implications

Favorable indicators, with some caveats

Artificial intelligence litigation persists

Missed earnings guidance and performance challenges

Macroeconomic risks can still lead to litigation

Implications for both companies and underwriters

Our people

Matthew T. McLellan

Related insights

Risk in Context Podcast: Protecting leaders from escalating D&O risks

FINPRO 2026 Emerging Risks Webinar

Evolving Cyber Risks in Energy Amid Transition

Challenges using non-admitted insurance for directors and officers abroad

Marsh.com Sign in

Mixed securities litigation trends and potential D&O implications

Favorable indicators, with some caveats

Artificial intelligence litigation persists

Missed earnings guidance and performance challenges

Macroeconomic risks can still lead to litigation

Implications for both companies and underwriters

Talk to us

Our people

Matthew T. McLellan

Related insights

Risk in Context Podcast: Protecting leaders from escalating D&O risks

FINPRO 2026 Emerging Risks Webinar

Evolving Cyber Risks in Energy Amid Transition

Challenges using non-admitted insurance for directors and officers abroad