The Baldwin Group Study Reveals Companies May Be Overpaying for Directors & Officers Insurance
A recent study conducted by The Baldwin Group in collaboration with Nasdaq has found that many companies, particularly mid-cap firms, may be over-insuring their Directors & Officers (D&O) coverage by $10 million to $20 million more than their risk profiles justify. The 2025 D&O Benchmarking Report analyzed data from over 250 public companies across various industries and market capitalizations.
Key Findings of the Report
- Average premium costs and retentions for D&O insurance continued to decline in 2024, extending a three-year trend of softening market conditions.
- The average retention levels dropped from $2.5 million to $1.5 million.
- The average premium for $5 million in limits fell to $277,985, down from $315,222 the previous year.
- Technology and healthcare sectors led in rate reductions at -15.0% and -13.6%, respectively.
Potential Over-Insurance Gap
Despite the declining premiums, the study suggests that many companies are purchasing more D&O insurance than they need. For instance, public companies with a market capitalization between $500 million and $1 billion face an average settlement of $8.2 million in securities class actions, with total risk exposure ranging from $12 million to $15 million. However, many of these companies are buying up to $40 million in coverage, indicating a potential over-insurance gap of $15 to $20 million.
Strategic Approach to D&O Insurance
“Too often, insurance decisions get treated as one-off transactions. At Baldwin, we take a different approach—advising companies on the smartest path forward based on their actual risk exposure, business goals, and capital priorities,” said Dan Galbraith, President of The Baldwin Group and CEO of Retail Brokerage Operations. The report emphasizes the importance of aligning D&O programs with actual risk exposure to ensure effective use of corporate resources.
Conclusion
The 2025 D&O Benchmarking Report provides granular benchmarking for premium changes by sector and market capitalization, enabling companies to compare their renewal experiences against similar peers. As the market continues to soften, with an overall average rate change of -9.7% in 2024, companies are advised to reassess their D&O coverage to avoid over-insurance and optimize their insurance spending.
