Rising insolvencies and a perfect storm of risks are creating a new dynamic for the world’s business leaders.

Insurer Allianz Commercial warned political, economic, and social uncertainties are on the rise globally and are impacting every aspect of a company’s operations, as well as lead to significant changes in financial, regulatory, and legal environments.

It added failure to anticipate and adapt can expose companies to operational failings, financial loss and reputational harm with consequences for the companies’ directors and officers.

According to Allianz Commercial’s latest Directors and officers (D&O) insurance insights report, D&Os can be held accountable for misjudging the impact of geopolitical developments on their company’s operations or for failing to adequately adapt to the legal or regulatory requirements in different countries. Liability for D&Os may arise from shareholder lawsuits or regulatory penalties directed both against the entity and individual decision-makers.

At the same time, cyber liability risks for directors and officers have risen sharply in recent years with higher expectations for board level oversight of cyber security and a trend towards more litigation and regulatory actions.

As such, exposures for D&Os typically arise from their duty to oversee the organisation’s cyber security posture. Claims against directors have been triggered by a wide range of events, including data breaches, ransomware attacks, and even technical glitches. Ransomware accounted for around 60% of the value of large cyber insurance claims (>€1mn) seen by Allianz Commercial during the first six months of 2025, according to its annual Cyber security resilience outlook. Should a cyber incident result in financial loss, directors could face legal claims from shareholders, customers or suppliers if the board is seen to have failed to implement adequate risk controls or business continuity planning.

“Directors and officers (D&O) liability continues to develop at pace, with an evolving regulatory and litigation environment, an increasingly complex risk landscape, and an uncertain geopolitical and economic outlook,” explained Jarrod Schlesinger, global head of financial lines and cyber at Allianz Commercial. ”Against this backdrop, there has been a continual increase in the frequency of new claims against directors, now approaching or exceeding pre-pandemic levels in most regions around the world.  Meanwhile, claims severity continues to be an issue in North America in particular.”

Bankruptcy and regulatory enforcement actions are among the top sources of private D&O claims, although claims can also arise from allegations for breach of fiduciary duty, such as misleading or inadequate disclosure, or negligence. According to Allianz Trade, global business insolvencies are expected to rise by +6% in 2025 and +5% in 2026. Next year will mark five consecutive years of increases to reach a record high number of bankruptcies, +24% above the pre-pandemic average. Insolvency risks are particularly concentrated in the automotive, construction, retail, and consumer goods sectors.

“Managing a multinational corporation has never been more challenging, as leaders find themselves caught between conflicting governmental priorities and policies across the globe, and trade tensions and fiscal challenges weigh on the economy. It’s important that directors understand their expanded fiduciary duties in the event of an insolvency, seek expert advice, and keep detailed records of all key decisions. Such information will prove critical if D&Os face claims of mismanagement or allegations of conflicts of interest,” added Dan Holloway, head of management liability commercial and professional indemnity at Allianz Commercial.

The insurer added over the past three years, there has been a continual increase in the frequency of new claims against directors and officers, now approaching or exceeding pre-pandemic rates in most regions of the world.

Claims severity continues to be an issue in North America. For D&O insurers, the US especially is a highly complex market due to its high frequency of securities class action claims and surging average settlement costs, which rose by 27% in the first six months of 2025 to $56 million. Meanwhile, shifting governmental policy in the US and parts of Europe regarding DEI (diversity, equity, inclusion), ESG (environmental, social, governance), and artificial intelligence (AI) have introduced new complexities for boards to navigate.

“Entering 2026, the environment for corporate management will continue to be defined by converging economic uncertainty, rapid technological change, and evolving regulatory expectations. Fast-evolving areas like tariffs and AI are difficult areas of risk to navigate, as well as to predict and quantify. Robust governance and risk management are critical, but in today’s volatile climate, boards must also seek out the tools and expertise needed to identify, manage and communicate these future risks to stakeholders,” concluded Schlesinger.