Activist Investors and Increased Litigation: D&O Insurance Strategies to Weather Shareholder Campaigns

As shareholder activism and follow‑on litigation accelerate across US capital markets — particularly in hubs like New York City and San Francisco — corporate boards and risk managers must revisit Directors & Officers (D&O) liability programs for resilience. This article explains the litigation landscape, how D&O pricing and capacity are changing, and practical insurance strategies to protect boards during activist campaigns in the United States.

Table of Contents

Why activism is driving more D&O litigation (US focus)

Activist funds such as Elliott Management, Starboard Value, and Third Point continue to press operational and governance changes — often triggering disclosure, fiduciary-duty and derivative claims if campaigns turn contentious.
Increased SEC scrutiny, expanded ESG expectations and cyber risks mean activist campaigns frequently spawn litigation alleging misstatements, inadequate disclosures or board failures.
Market evidence: brokers and market reports show D&O renewal pricing and retentions moved materially higher in 2023–2024 as carriers reacted to higher claim frequency and severity (see market commentary from Marsh and Aon). Marsh: Global Insurance Market Index | Aon: US market updates

The result: boards in NYC, Boston, Chicago and Bay Area companies increasingly face derivative suits and SEC inquiries tied to activism — and claim activity pushes D&O underwriters to tighten terms and raise premiums.

Market dynamics: pricing, capacity and carrier behavior

Key realities for US buyers in 2024–2025:

Premiums up, especially for public companies. Across many sectors, D&O renewal increases ranged from 20% to 60% depending on industry and claim history, with activist‑targeted issuers at the higher end (broker market commentary).
Higher retentions and narrower entity coverage. Carriers are imposing larger company retentions and more restrictive corporate reimbursement (Side B) language for issuers with recent activism experience.
Selective capacity. Top carriers (Chubb, AIG, Travelers) remain active but are selective about industry exposures (tech, biotech, energy) and companies with recurring governance risk.
Side A and bespoke wording in demand. Directors want stronger Side A (individual director) protection and explicit crisis response/transaction wording when activist demands escalate.

Practical pricing benchmarks (US market ranges, illustrative):

Small public companies (<$500M revenue): primary D&O $1M–$3M limits — annual premium approximately $150k–$400k.
Mid‑market public ($500M–$2B revenue): primary $3M limits — annual premium approximately $400k–$1.2M.
Large caps / complex targets ($5B+ revenue): multi‑million premiums and layered towers; aggregate annual spend commonly $1M–$5M+.

Sources: Marsh & Aon market reports and public market commentary. See broader reporting on activist‑driven litigation trends: Reuters analysis of activist suits and market impact. (Examples of increased litigation frequency noted in industry press). Reuters: Activist investors and litigation trends

Practical D&O insurance strategies for boards and CFOs

Boards and risk teams should adopt a programmatic approach combining preventive governance and insurance structuring.

1) Proactive governance + litigation preparedness

Update public disclosures, board minutes and engagement documentation to evidence a robust decision‑making process.
Maintain rapid response playbooks: investor relations, legal counsel, and insurers should rehearse lines of communication for activist overtures.
Invest in pre‑emptive mediation and engagement resources to reduce escalation.

2) Placement and limit strategy

Buy adequate Side A limits: in many activist scenarios, company reimbursement is impaired; Side A or Side A‑DIC remains critical.
Layer limits across primary and excess markets—don’t rely on a single carrier to absorb activist exposure.
Consider increased limits for one‑time campaigns: tactical limit purchases can be more cost‑effective than enduring chronic underinsurance.

3) Policy wording and exclusions to negotiate

Seek affirmative crisis response coverage and carve‑backs for insured‑versus‑insured (IVI) exclusions that often hamper derivative litigation defense.
Negotiate for broad “change of control/transaction” language where activist demands might trigger M&A activity.
Push for coverage continuity and tail options on renewals; activists can re‑engage after policy periods.

4) Pricing levers and retention tactics

If market is hardening in NYC and San Francisco, consider accepting a higher retention while preserving Side A limits to control premium spend.
Use captives for retentions or to fund part of a layered program — attractive for repeat target companies with stable loss histories.

Tactical checklist for renewals (90–120 days before renewal)

Run an activism scenario stress test with outside counsel and broker.
Prepare a claims history summary highlighting governance improvements.
Solicit multiple carrier indications, including specialty markets for Side A excess.
Document engagement protocols and board minutes to present to underwriters.

Comparative view: common D&O placement options for activist targets

Strategy	Benefits	Typical Cost Impact (US market)
Increase Side A primary limits	Protects individual directors when entity cannot reimburse	Moderate to high (10–35% premium uplift)
Layer excess limits with international carriers	Greater capacity, diversification	Higher premium but market dependent
Higher retention / captive funding	Lowers annual premium, keeps coverage	Lowers premium 10–30% but increases balance sheet volatility
Purchase special crisis services add‑on	Rapid PR/legal support coverage	Small additional premium; high value in campaigns

Case examples and carrier behavior

Activist campaigns targeting large public companies in New York often prompt plaintiffs’ firms to file derivative suits within weeks. Carriers such as Chubb, AIG and Travelers have publicly signaled stricter underwriting for repeat target profiles — leading to 25–50% renewal increases in some cases for exposed issuers. Market commentary from Marsh and Aon confirms these trends. Marsh market index | Aon US market update
A mid‑cap tech company in San Francisco that engaged early with an activist investor reduced escalation and obtained more favorable renewal terms (lower premium increase and stable retentions) — illustrating the financial value of early engagement.

Next steps for boards and risk managers (US companies)

Engage brokers now to run advocacy and underwriting diligence targeted at NYC/SF markets.
Update governance and disclosure documentation to present a stronger underwriting profile.
Price Side A protection as essential — expect to pay a premium for proven Side A capacity.
Coordinate with legal and IR teams to document responses to activist outreach to reduce litigation exposure.