Are Companies Over-Insuring Their Directors & Officers Insurance? Baldwin Group’s Latest Report Raises Questions

In its newly released 2025 Directors & Officers (D&O) Benchmarking Report, the Baldwin Group, in collaboration with Nasdaq, has uncovered a surprising trend: many public companies may be carrying $10 million to $20 million more in D&O coverage than their actual risk profiles justify.

The Purported Over-Insurance Gap

The report makes the case that many firms—particularly mid-cap companies—are still purchasing far more insurance than they need. For example, a public company with a market capitalization between $500 million and $1 billion faces an average securities class action settlement of $8.2 million, with total risk exposure (including legal costs) ranging from $12 million to $15 million. Yet, many companies in this category are purchasing up to $40 million in coverage, signaling a potential over-insurance gap of $15 to $20 million.

Insights from Stanford Securities Class Action Analytics

One of the most interesting sections of the report draws from Stanford Securities Litigation Analytics, which tracks securities class action settlements. According to this data, the median settlement amount for securities class actions fell to $14 million in 2024, marking a significant drop from previous years. The average settlement amount also decreased by 13% to $42.4 million, reinforcing the notion that litigation exposures may be lower than previously estimated.

The Baldwin Group appears to suggest that the discrepancy between actual risk exposure and purchased coverage means that companies may be allocating capital inefficiently, spending millions on insurance limits they may never need. Investors harmed by corporate misconduct may take a different view. Isn’t the whole purpose of insurance to protect against unforeseen events?