The insurance industry has been operating in an environment of increased complexity in 2025, with regulatory scrutiny, technological disruption, and societal shifts converging to reshape risk profiles and coverage expectations. For underwriters, brokers, and risk managers, the challenge is not only to keep pace with these changes but to anticipate their implications across product wordings, pricing, and claims, whilst also keeping an eye on what the future might hold.

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In this Holiday Special, we explore the key trends that have shaped changes in insurance coverage in 2025, drawing on our own insights and market observations, as well as taking a look at some of the new legislation currently passing through the UK Parliament with the potential to influence the insurance marketplace in 2026 and beyond.

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Setting the scene

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The insurance market in 2025 could be categorised as one defined by convergence—where regulatory reform, technological innovation, and societal expectations have collided to create new exposures and reshape traditional coverage boundaries. Insurance and Risk professionals are navigating a landscape that demands agility, clarity, and foresight. Against this backdrop, eight key trends stand out for us as the most influential forces shaping underwriting strategies and client risk management this year.

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1. ESG & Sustainability clauses: From greenwashing to regulatory heat

Environmental, Social, and Governance (ESG) exposures remain one of the most significant drivers of change in liability insurance. Climate change continues to further permeate the risk agenda, with the scope of ESG risk now extending far beyond environmental impact to include governance failures and social responsibility lapses.

We covered the subject in our July 2025 article “The Great Wash 2025: Green, AI, and Tariff Washing – A New Era of Exposure”, noting in particular that regulators are cracking down on misleading sustainability claims. “Greenwashing” and its newer cousin - “AI washing” (also a fertile new source of US securities claims) and potentially “tariff washing” - are attracting enforcement actions and litigation. For Insurance and Risk professionals, this has meant:

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• A higher frequency of ESG-related claims: Particularly in sectors such as energy, automotive, and financial services.

• Policy wording evolution: we have increasingly seen sustainability related clauses embedded in D&O and other liability policies, clarifying coverage for ESG-related investigations and civil claims.

• Claims inflation: Regulatory fines and reputational damage costs are driving up loss costs, a factor that all parties need to consider carefully when assessing their exposures.

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Many of these issues are awash with political sensitivities and so firms on both sides of the insurance buying relationship will be treading carefully in the way they seek to address those risks.

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2. Cyber-linked extensions in Financial Lines: The blurring of boundaries

Cyber risk is no longer confined to standalone cyber policies. There has always been an inherent risk of this given computers are a medium through which all insured activities pass. Cyber extensions are increasingly appearing in D&O and multi-line Management Liability products, reflecting the reality that cyber incidents often trigger regulatory investigations and shareholder actions, with increasingly broad elements of financial risk for firms. For instance, which policies should handle cyber investigations – D&O, PI, Crime or Cyber? In reality it may be all four depending on the facts.

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In our January 2025 newsletter on Corporate Legal Liability (CLL) we noted the growing inclusion of entity coverage within D&O programmes and the trend for limited cyber liability coverage to be included. While this offers balance sheet protection, it raises a critical concern: limit erosion. When entity losses compete with directors’ defence costs for the same policy limit, the core purpose of D&O—protecting individuals—can be compromised.

The key issues we have seen firms trying to address have been:

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• Ring-fencing limits: policy wordings are increasingly moving to separate limits for entity coverage.

• Pricing pressure: Cyber-linked extensions are adding complexity to rating models, particularly for sectors with high data dependency such as fintech and asset management.

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3. Regulatory investigation coverage: Loosening the grip

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Regulatory investigations are becoming more frequent and intrusive, with insurers generally anticipating higher defence cost exposures. In 2025, we’ve seen a loosening of coverage terms for PI and GL policies, while D&O had already moved in this direction. It doesn’t matter that politicians have been scrapping some plans for new regulation. The regulatory emphasis this year has been just as much about enforcing existing regulations: there has been more activity to investigate than ever before.

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The UK Economic Crime and Corporate Transparency Act (ECCTA) adds another layer of complexity. Its new corporate offence of “Failing to Prevent Fraud”, which came into effect in September 2025, will expose large organisations to criminal liability for fraud committed by associated persons. As we noted in our March 2025 newsletter, this raises questions about coverage under D&O, CLL, and PI policies. While defence costs may be covered, fines will remain largely uninsurable.

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It's an area where Insurance and Risk professionals should review policy language to ensure clarity on coverage for criminal investigations and associated defence costs.

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4. Crypto & digital assets: Exclusions and emerging risks

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Digital assets continue to challenge traditional coverage frameworks, and this is an area we expect to see becoming even more prominent for those involved in managing these risks as we move into 2026 and beyond. Simply excluding them isn’t going to be an option in the future.

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It’s a topic we discussed in our September 2025 feature “New Frontiers: Insuring the Value of Lost Data”. With exclusions for crypto-related exposures becoming standard, the Property (Digital Assets etc) Act 2025 is something Insurance and Risk professionals will need to consider carefully. 

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Since we wrote about the subject in September, the Bill has now received Royal Assent. One of the most significant elements is the move to classify data (including cryptocurrency and non-fungible tokens) as property, which has the potential to reshape liability and property triggers, coverage and exclusions. Indeed, with the term ‘property’ used across so many types of insurance wording (whether through coverage or exclusions), it could have a significant effect for a large proportion of policy wordings in use. However, the courts will have significant leeway to decide where the boundaries of this new category of property may lie, so expect litigation to drive how wordings will then respond. 

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5. Employment Practices Liability (EPL): DEI and AI risks take centre stage

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The UK’s Employment Rights Bill marks the biggest upgrade in employment law for a generation, with the potential to lead to significant EPL insurance implications. We explored how these changes - particularly around Diversity, Equity & Inclusion (DEI) and AI-driven HR processes – have the potential to influence underwriting in our April newsletter. Employment related investigations will fill gaps where private employment rights enforced through tribunals (covered traditionally under EPL policies) don’t go, and will drive the need for EPL entity investigations cover. 

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November’s reversal of “day one” unfair dismissal rights underscores the volatility of this piece of draft legislation, and it is an area where those involved with such risks will need to remain alert to further, possibly subtle, changes. 

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The risk of AI bias in recruitment and performance management systems is a growing source of claims, and it is likely those involved with EPL policies – and PI policies for the recruitment industry – will want to ensure this is addressed explicitly.

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6. Broader cyber definitions in PI and tech E&O

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Blending is a bigger issue than Cyber, but cyber risks stand out as a topic of much debate between Insurance and Risk professionals in 2025, with Cyber cover typically present in many blended products now. FinTech firms now routinely purchase policy suites combining D&O, PI, Crime, EPL, PTL, and Cyber. We are seeing Investment Management Insurance (IMI) policies now increasingly including Cyber. While this holistic approach helps meets client needs, overlapping insuring clauses create uncertainty and potential disputes, requiring much care from all involved to ensure the coverage provided is as required by all parties.

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Drafting clear interlocking provisions to avoid coverage gaps or unintended double-dipping requires much care and collaboration between product teams and a willingness to innovate beyond traditional silos.

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7. Market conditions: Pricing, capacity, and claims

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While not the headline story of 2025, market dynamics remain influential across the 3 core areas of pricing, capacity and claims. These may not on the face of it seem obvious issues for a firm that specialises in policy wordings, but as we have previously noted, they can be drivers for change in coverage, either through drafting or product softening.

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• Drafting softening refers to the move toward plain English, simplified claims conditions, and clearer structure —driven, at least in part, by the FCA’s Consumer Duty. 

• Product softening involves expanding the scope of cover, reducing exclusions, or offering broader terms to remain competitive.

 

We have seen examples of both in the last 12 months – even the commercial PI market has woken up to the idea of more modern “plain English” wordings, and it is a trend we anticipate will continue in 2026.

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8. Product blending: The defining workstream of 2025

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If one theme captures the essence of 2025 for those interested in policy coverage, it is convergence. The blending of products that were once distinct into integrated solutions designed to meet increasingly complex client needs. This trend is not just cosmetic: it reflects a fundamental shift in how risks manifest themselves and how buyers expect them to be managed. Modern problems fit less well into traditional product classes than they did.

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Why Blending Has Become Critical

Businesses today operate in an interconnected risk environment. A single event - such as a Cyber breach - can trigger multiple exposures: regulatory investigations, shareholder actions, employment disputes, and even crime-related losses. Traditional siloed products struggle to respond effectively to these cascading liabilities and risks. As a result, insurers are moving toward multi-line packages that combine D&O, PI, Cyber, Crime, EPL, and Pension Trustee Liability (PTL) into a single suite.

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We highlighted this evolution in our August 2025 article, “Evolving Wordings and Emerging Risks: Insights from the Front Line”, noting that FinTech firms are leading the charge, routinely purchasing blended policies that address their unique mix of technology, regulatory, and governance risks. These packages often include first-party Cyber cover alongside third-party liability, creating a more holistic risk transfer mechanism. Where FinTech firms are leading though, others will follow.

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Looking ahead to 2026: What is on the UK legislative radar?

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How is what we have been seeing in 2025 going to play out in 2026? 

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As we look ahead, the legislative pipeline shows no signs of letting up with a raft of regulatory and social policy developments currently under consideration in Parliament. These proposals span technology regulation, corporate governance, employment rights, and whistleblower protection—all areas with direct or indirect implications for D&O, EPL, PI, and Cyber coverage. We’ve touched on one or two draft pieces of legislation already – here are some others to watch – using traffic light colours to indicate their predicted chances of making it into UK law!

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Key Bills to Watch

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1. Artificial Intelligence (Regulation) Bill

Purpose: To make provision for the regulation of artificial intelligence and connected purposes.

Insurance angle: If enacted, this will introduce compliance obligations for AI deployment, creating new exposures for directors and officers and potential PI claims for tech providers. Cyber policies may also need to adapt to cover AI-related failures or regulatory investigations.

Likelihood: This originated in the House of Lords and is Conservative sponsored. It seems very unlikely to make it into law and no date has yet been allocated for a 2nd Reading.

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2. Company Directors (Duties) Bill

Purpose: To amend section 172 of the Companies Act 2006, requiring directors to balance their duty to promote company success with duties toward the environment and employees.

Insurance angle: This would hardwire ESG duties into directors’ statutory obligations, increasing the risk of claims under D&O policies for alleged breaches. There would be risks and opportunities here for the insurance market.

Likelihood: This is a private members Bill sponsored by the Lib Dems. It seems less likely to make it into law, although it has entered the 2nd Reading stage.

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3. Employment Rights Bill

Purpose: Comprehensive reform of employment law, including redundancy procedures, equality duties, and trade union rights.

Insurance angle: Almost certain to take effect in 2026, this will drive demand for more comprehensive EPL cover and broaden the scope of claims - especially around equality and procedural fairness. AI-driven HR systems could also come under scrutiny.

Likelihood: A core element of the Labour manifesto, it has full government backing.

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4. Office of the Whistleblower Bill

Purpose: To establish an independent Office of the Whistleblower with powers to enforce standards and order redress.

Insurance angle: Whistleblowing claims have implications for D&O and EPL exposures. A dedicated regulator could increase investigation frequency and severity, making whistleblower protection clauses a hot topic for those considering policy coverage.

Likelihood: This is a Labour sponsored Private-members Bill, with a confirmed date in 2026 for the 2nd Reading stage. It would seem to have reasonable prospects of becoming law, if time allows.

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5. Reasonable Adjustments (Duty on Employers to Respond) Bill

Purpose: To impose deadlines for employers to respond to requests for reasonable adjustments from disabled workers.

Insurance angle: Non-compliance could lead to discrimination claims under EPL policies. Adjustments coverage is generally excluded under EPL at the moment. Insurers may need to consider sub-limits or risk management services tied to accessibility compliance.

Likelihood: This is a Labour sponsored Private-members Bill, waiting for a date for the 2nd Reading stage. Its prospects of becoming law seem unlikely given it has not originated from the front bench.

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6. Regulators (Growth Objective) Bill

Purpose: To include economic growth as an objective for certain regulators.

Insurance angle: While less directly relevant, this could influence regulatory enforcement priorities, potentially softening the tone of investigations—but uncertainty remains.

Likelihood: This is a Labour sponsored Private-members Bill, waiting for a date for the 2nd Reading stage. Its prospects of becoming law seem remote given it has not originated from the front bench.

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7. Regulatory Impact Assessments Bill

Purpose: To require impact assessments for all legislation.

Insurance angle: Indirect relevance - could improve transparency around regulatory changes, aiding insurers in forecasting liability trends.

Likelihood: A Conservative sponsored Bill that has made it to the 2nd Reading stage. Unlikely to make it. The Labour backed Regulators (Growth Objective) Bill (above) seems likely to supersede. 

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8. Statutory Adoption Pay (Report on Extension to the Self-Employed) Bill

Purpose: To explore extending statutory adoption pay to self-employed workers.

Insurance angle: May influence EPL coverage for contractors and gig economy workers, an area already under scrutiny.

Likelihood: A Lib Dem sponsored Bill, now at 2nd Reading stage, but seems unlikely to make it.

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Conclusion

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The theme of convergence is certainly one that stands out as we reflect on 2025. ESG imperatives, Cyber integration, and blended liability products have helped to redefine the insurance landscape, while regulatory scrutiny and societal expectations have raised the stakes for directors, employers, and service providers alike. The past year has shown that coverage innovation is no longer optional - it is essential to ensure alignment between evolving exposures and client demands. It is innovation that will be the glue in the relationship between Insurance and Risk professionals.

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Looking ahead to 2026, the legislative pipeline signals further disruption – and opportunity. Bills making their way through Parliament not only have the potential to influence underwriting strategies but also accelerate the need for clear, integrated solutions that avoid ambiguity and deliver real value for all parties. We will circle back to those bills that seem likely to become law in our 2026 Newsletters. 

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For Insurance and Risk professionals, the challenge - and opportunity – can be summarised in three key areas:

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• Precision in wording: As products blend, clarity becomes critical to avoid disputes and maintain trust.

• Proactive engagement: Anticipating legislative change and guiding clients through compliance will differentiate market leaders.

• Innovation with purpose: success will rely on the ability to combine technical excellence with practical solutions, bringing innovation to bear with effective coverage developments.

 

In short, 2026 will not be a year for complacency. It will be a year for strategic foresight, collaborative problem-solving, and bold product design. Those who embrace these principles will not only navigate complexity, they will lead the market into a new era. 

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In short, Coverage will Matter more than it has ever done. 

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