Allianz Report: Rising Liability Risks for Directors and Officers in 2024

Allianz Commercial’s latest D&O insurance report points to a challenging year ahead for company directors and officers (D&Os) in 2024, with several factors increasing the likelihood of lawsuits. Economic pressures, geopolitical tensions, technological innovations like GenAI, and environmental, social, and governance (ESG) challenges are driving this risk.

The report notes that the global business landscape remains challenging post-COVID-19, with disappointing economic growth and a predicted rise in business insolvencies. Inflationary pressures and the challenge of refinancing debt add to the burdens faced by D&Os. Stakeholders are closely scrutinizing decisions around capital expenditure and debt management.

Geopolitical risks, highlighted by conflicts such as the war in Ukraine, add to the complexity. Political risks are at a five-year high, necessitating that directors ensure their companies are prepared for potential business interruptions and employee safety concerns in high-risk areas.

GenAI has emerged as a critical area, with a third of organizations using it in at least one business function. However, this technology brings its own set of challenges, including privacy risks and potential intellectual property claims.

ESG-related regulatory actions or litigation are also major concerns. Increasing reporting and disclosure requirements on ESG issues could lead to litigation in case of inadequate response or non-compliance. Recent claims include allegations of failure to manage climate risk and breach of duties related to ESG strategies.

The March 2023 U.S. banking crisis also sheds light on the role of social media in exacerbating business crises, with the collapse of Silicon Valley Bank as a case study. This event highlights how social media can rapidly escalate crises, presenting new challenges for D&Os.

The report suggests that for 2024, directors and officers need to be prepared for these headwinds with nimble and adaptive strategies. It emphasizes the importance of diversity in the boardroom for varied approaches to problem-solving and the need for C-suite executives to push beyond industry norms to stay ahead.