US Securities Class Actions: Size Matters.
What The H1 2025 Trends Mean for D&O Insurance
As we enter the final quarter of 2025, the US securities class action landscape presents a paradox: filing volumes are flat, but cases have been getting bigger and, as this article suggests, will continue to get bigger in the foreseeable future.
Meanwhile, non-US issuers are enjoying a relative lull in US securities claim activity.
For insurers, brokers, and risk managers, particularly for those not in the US D&O business day to day the latest developments paint a highly nuanced picture and a trap for the unwary.
Why US Securities Class Actions Matter to the D&O Insurance Market
US securities class actions play a pivotal role in shaping the global D&O insurance market. These lawsuits, typically brought by shareholder investors against public companies and their executives, allege violations of securities laws—often involving misstatements, omissions, or other misleading disclosures. Their frequency, severity, and legal complexity make them a central concern for D&O practitioners.
High Frequency and Financial Impact
The US sees more securities class actions than any other jurisdiction. This is largely due to its legal framework, which facilitates class action litigation and encourages shareholder activism. For D&O practitioners, this translates into a high volume of claims, many of which result in substantial settlements or judgments. Even when cases are dismissed or settled early, the legal defence costs can be significant—often running into millions of dollars. These expenses directly affect insurers’ loss ratios and eventually may drive up the cost of coverage.
Broad Scope of Liability
US securities laws, particularly the Securities Act of 1933 and the Securities Exchange Act of 1934, impose stringent disclosure requirements on public
companies. Their directors are personally accountable for ensuring the accuracy and completeness of financial statements and other public disclosures. This broad scope of potential liability makes the US market uniquely risky for corporate leadership and, by extension, for their insurers.
Litigation-Friendly Environment
The US legal system is notably plaintiff friendly. Features such as contingency fee arrangements, class action mechanisms, no “loser pays” rule, and a highly sophisticated plaintiffs’ bar make it easier for shareholder investors to initiate lawsuits. A single adverse corporate event causing a sharp drop in share price can quickly lead to litigation.
Global Implications
The influence of US securities litigation extends beyond US domestic borders. Companies who raise capital on US markets will be subject to the US securities laws, for example, non-US companies with American Depositary Receipts (ADRs) or direct US listings. As a result, D&O insurance practitioners must assess US exposure even when dealing with policies for non-US registered entities. This global reach amplifies the importance of US litigation trends in shaping international D&O insurance practices.
Trail-blazing
The US has always led the way in developing liability theories for misstatements and non-disclosures by public companies and their directors – and these theories eventually influence how the rest of the world views them. This doesn’t mean we are all going to follow the US model but gradually legal systems and litigation cultures across the world have been changing: to make it easier to litigate against public companies and their directors.
Very Trackable
Unlike pretty much anywhere else there is a plethora of reliable public information available about US class actions and well respected companies providing detailed statistical analysis on a monthly or yearly basis. This makes it very easy to spot trends on which decisions about D&O insurance can be made. Inevitably this is the information everyone in the industry uses.
Conclusion
US securities class actions are a cornerstone of the D&O insurance landscape. Their prevalence, cost, and complexity make them a key driver of underwriting decisions, pricing models, and global risk assessments. For insurers and insureds alike, understanding and managing this exposure is essential to maintaining financial stability and effective corporate governance. Against that background, what are we seeing?
Filing Volumes: Plateau, Not Peak
This time last year I wrote an article about the number of US securities class actions in 2024 (see here) and predicted it would reach 220. The first half of 2025 saw 114 federal securities class action filings, putting us on track to match, or possibly exceed, 2024’s actual total of 225. This plateau, which started in 2021, is well below the 2017 peak of 411, and seems to indicate there has been a stabilisation going on. Nevertheless, the National Economic Research Associates (NERA) mid-year report has suggested a nuance in this stabilisation: Q1 2025 saw the highest quarterly filing volume in five years,
while Q2 marked the lowest (1).
While the number of US securities class actions remains high by global standards, the “stabilisation” since 2021 reflects a maturing litigation environment shaped by legal reforms, market shifts, and strategic recalibration by plaintiffs. For the D&O insurance market, this means a more predictable—though still costly—risk landscape.
Claim Sizes: Quickly Climbing
The frequency may be flat, but the severity is up. This is the real news: big claims translate into big settlements at some point – this is when the rubber hits the road for the insurance market, and we see all that abundant capacity being soaked up.
The Disclosure Dollar Loss Index (“DDL”– as devised by Cornerstone), which is the total stock drop for all companies sued following the revealing of an issue, hit $403 billion in H1 2025 – a 112% increase on the figure for H1 2024 and some 55% up on the H2 2024 figure. Mega filings (>$5bn) also hit a record high, with AI-related cases comprising 15% of the total stock dropped.
The maximum total stock drop during all class periods in US securities class actions (the “MDL”) in H1 2025 was a whopping $1.85 trillion – a 154% increase on the previous 6 months.
The DDL and MDL are key indicators of the severity of class actions for the D&O
industry. In summary:
-
DDL size rose steadily from 2020 to 2023, dipped in 2024, then surged to a record $403 billion in 2025.
-
MDL followed a similar pattern, peaking dramatically in 2025 at $1.851 trillion, indicating a shift toward larger, high-impact cases.
For D&O insurance professionals the question of limit clearly needs careful consideration while capacity is comparatively cheap.
AI Litigation: The New Bubble
AI-related claims have surged, doubling from 7 in 2023 to 15 in 2024, and with 12 AI-related filings already in 2025, the clear implication is that the number for the year will likely far exceed the previous two years. These cases are no longer just about “AI-washing”—the overstating of capabilities—but increasingly focus on:
-
Operational risk disclosures: Failure to disclose AI-related risks in financial statements.
-
Misrepresentation of capabilities: Claims that firms exaggerated the functionality or readiness of AI systems.
This aligns with warnings from both the SEC and UK regulators in 2024, urging firms to substantiate AI claims and ensure robust governance.
This increasing prevalence of AI-related claims could well accelerate if there is, as many commentators believe, a bubble going on in AI related stocks, with a “correction” in valuations just around the corner. We could see an increase in overall severity and frequency of securities claims driven by AI related securities litigation.
D&O insurance will be there when the time comes. As an “all risks” policy securities claims will be covered for both the directors (Side A and B, most likely the latter) and their companies (Side C) in seamless fashion. The only query will be whether there is sufficient limit for some claims.
Sector Trends: Subtle Shifts In Exposure
Going back to the stats, the top three industry sectors for filings in H1 2025 remain pretty consistent: “Consumer Non-Cyclical” ie companies that produce every day essentials we all need, including biotech and pharma, leads the way, with Technology firms following as has been the trend for some time. In third place for H1 2025 is the Industrial sector.
AI-related filings were concentrated in the Technology sector, with Communications and Industrials also seeing activity.
The Consumer Non-Cyclical sector accounted for 27% of mega-case filings in 2024. For UK practitioners, understanding this shift in sectoral exposure matters. The biotech boom—and bust—has implications for pricing and risk appetite, especially where firms are dual-listed or have US investor bases.
Non-US Issuers: Sleep Easy?
Interestingly, filings against non-US issuers remain in decline, both in absolute terms and as a percentage of total filings (16% in 2024 vs. 33% in 2020).
This trend, which began in 2020, reflects:
-
A more cautious approach by US plaintiffs with easier targets at home
-
There is a greater concentration of AI investment in the US, and we know AI is a big driver of claims at the moment.
-
Jurisdictional challenges, in respect of “unsponsored” Level 1 ADRs in particular.
-
Possibly, better risk management by non-US firms?
US derivative claims against non-US company directors are also in decline following successful jurisdiction challenges in some high profile cases.
For now, non-US directors can sleep easier.
Insurance Implications: Time to Evolve
Limits will be key for companies with a heavy dependency on AI, or staking their futures on AI, whether it’s disclosures about AI or the management of AI that is the trigger for claims. Going forward, all companies will face these issues at some point. Additional limits could be available for companies with sound governance around AI.
Exclusions for AI related claims are not a credible option given D&O is an all risks cover, and, again, in the future all business will depend on AI to a large extent. Are we moving towards a time when for some companies D&O must be combined with other covers to provide a holistic solution to the risks that AI poses?
Final Thought
2025 may not be a breakout year for securities litigation volumes— but this is only half the story. There will be a wave of mega settlements coming up the tube in the next three to five years. And the lower frequency may just be temporary before the AI bubble bursts. For buyers, it’s a great time to buy more cover in anticipation. For sellers, risk selection and avoiding aggregation of AI related D&O risks will be key. The D&O product will undoubtedly be there for companies who suffer big claims. But surely it will need to evolve in coming years to address what may turn out to be a structural shift… not a bubble.
As ever, Coverage Matters.