The #MeToo movement and other social media-driven campaigns to expose alleged sexual misconduct are adding to the already significant risk exposures facing directors’ and officers’ (D&O) insurers, according to AM Best.

The ratings agency expects the highly competitive D&O market to remain under pressure as insurers seek to mitigate the #MeToo movement fallout and other worsening exposures such as shareholder class action lawsuits, cyber breaches and governance failings.

“Growing shareholder activism, ongoing pressure created by the #MeToo movement, and rising cyber security risks will continue to pose considerable challenges to underwriters,” AM Best says in a new report.

“The D&O insurers that refine their risk appetite and risk tolerance with the greatest effectiveness will likely have the best chance of successfully navigating the various headwinds they face.

“Underwriters also will need to be more astute with regard to decision-making about risk selection, coverage provisions, limitations, and exclusions.”

AM Best says the increasingly litigious environment in the US has “provided fertile ground” for an onslaught of claims.

“Allegations of sexual misconduct involving people in powerful positions – prominent corporate executives, media figures, politicians, and athletes - have spurred loss creep from employment practices liability to D&O, as the involvement of boards of directors and their roles and responsibilities get scrutinised.

“Because of the complexities involved with different claim scenarios, D&O perils present clash potential, and companies could end up paying on [employment practices liability] or cyber – as well as D&O – claims.”

AM Best says the next three to five years will be a test for the industry, as insurers try to accurately assess, underwrite and price for these exposures.

Rates will most likely continue going up, following on from the across-the-board rises seen last year after many years of decline.

But the increases have not been sufficient to address the deterioration in claims trends, the ratings agency says.

“Certain segments of the market, including public, private, and not-for-profit companies are looking at larger price increases for current renewals.

“Accounts with recent losses - especially those with large losses - are feeling the effects of underwriters’ more conservative pricing stances.

“Insurers that understand the more diverse spectrum of potential claims directors and officers now face are looking for even higher premium increases to reflect those exposures.”