Revealed – Key risk trends for directors and executives in 2024



Revealed – Key Risk Trends for Directors and Executives in 2024 | Insurance Business America















Allianz’s new business report identifies areas of interest for brokers and risk managers

News in risk management

According to
Kenneth Araullo

In a detailed report by Allianz The commercial highlighted that directors and officers (D&O) of companies face increasing liability risks in 2024 from a number of factors, including economic pressures, geopolitical issues, the adoption of technologies such as GenAI (generative artificial intelligence) and challenges. related to environmental, social and governance (ESG) aspects.

The report points to an expected 10% increase in corporate insolvencies by 2024. The lingering economic impacts of the COVID-19 pandemic, combined with high inflation and debt refinancing issues, have put additional pressure on companies. In addition, global geopolitical risks such as the conflict in Ukraine and tensions in the Middle East are increasing the scrutiny on directors to ensure that their companies are prepared for business disruption and employee safety in high-risk areas.

The report also sheds light on the impact of GenAI technologies, with a third of organizations reportedly using AI in at least one business function. Allianz Commercial advises that while AI presents competitive advantages, it also brings challenges such as cyber security threats, regulatory risks and misinformation. Recent lawsuits against AI companies have highlighted privacy and copyright issues, leading to a number of potential claims.

When it comes to ESG, regulatory action and litigation risks are significant concerns for boards. Increasing ESG reporting mandates expose directors to the costs of investigations, enforcement actions and potential fines for non-disclosure or misrepresentation.

“Not everyone involved has the same view of the problem or the same view of what action directors should take. In a world that is increasingly polarized politically and socially, the very need for directors to assess and address the impact of various ESG factors on company value creates the risk that activist shareholders or other motivated stakeholders will make claims on either or both sides of any given issue.” says David Ackerman, Head of Global Financial Lines of Allianz Commercial.

Finally, the report examines the impact of the US banking crisis of March 2023, when bad practices and rising interest rates led to bank failures and subsequent securities fraud lawsuits. The crisis has highlighted the influence of social media in accelerating financial crises, which represents another risk factor for D&O to consider.

Vanessa Maxwell, global head of financial lines at Allianz Commercial, notes that while D&O insurance buyers have had favorable conditions in 2023, a number of risks loom on the horizon.

“D&O and their insurers still face a lot of risk. Inflation continues to cripple and impact future claims through higher settlement values ​​– at a 10-year high – and higher defense costs,” Maxwell said. “The higher cost of debt refinancing is a shock. Insolvencies are on the rise, geopolitical uncertainty is significant, cyber risk is elevated, and ESG claims are here to stay and will prove challenging.

“D&Os must be prepared for these headwinds and have a strategy that can adapt when the business is presented with an obstacle. Diversity in the boardroom allows companies to have different approaches to these issues.”

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