D&O

Written by Rebecca D'Silva

Key developments in 2025

Enhanced Regulatory Scrutiny

As foreshadowed in last year's Annual Insurance Review, during 2025 the FCA has demonstrated its intention to increase its scrutiny of workplace culture and non-financial misconduct (NFM) at regulated firms. In July 2025, the FCA published its final policy statement and consultation paper CP25/18 introducing a new rule, COCON 1.1.7R, extending existing rules on NFM from banks (only) to non-banking firms. The FCA has also made clear that firms will be required to report serious substantiated NFM to the FCA.

The rule change means the regulatory focus on NFM will extend to some 37,000 more firms than previously, including insurers, insurance brokers, wealth managers and IFAs, and consumer credit firms. That means more scrutiny on more businesses and the directors and officers who lead them, which in turn may lead to an increase in the volume of regulatory investigations into firms' and individuals' compliance with the rules/their implementation, as a well as increased internal and regulatory investigations into individuals accused of NFM behaviour.  

The changes will be in force from 1 September 2026 and will not apply retrospectively. The FCA has chosen this date as it lines up with the conduct rule breach reporting period for most firms.

What to look out for in 2026

Insolvencies

Monthly company insolvency numbers so far in 2025 have been slightly higher than in 2024, but slightly lower than in 2023, which saw a 30-year high annual number of insolvencies. The insolvency rate remains well above the level seen in 2020 and 2021, although it is lower than the peak of 113.1 per 10,000 seen during the 2008-2009 recession.

In general, sustained high insolvency numbers mean that related or consequent claims against directors and officers can be expected to remain prevalent as liquidators focus on the directors' conduct leading up to (or causing) an insolvency. Wrongful trading cases, which have traditionally been difficult to bring successfully, may see renewed interest from insolvency practitioners looking to explore avenues for recovering assets from directors of insolvent companies (and their insurers). Similarly, claims for "trading misfeasance" may become more common where – wrongful trading aside – directors should have entered an insolvency process in order to comply with the requirement that they consider the interests of creditors (as well as shareholders) when exercising their duty to promote the success of the company.

A feature of the potential landscape in respect of such claims against directors and officers is the increasing use of litigation funders and after the event (ATE) insurance. This is allowing liquidators and administrators to bring claims that may otherwise be unaffordable and pursue those claims in a well-resourced and aggressive manner. Insurers may see an increasingly litigious environment emerge following company failures.

Private Credit Risks

A specific element of the potential insolvency "piece" that we anticipate may attract ever more attention is private credit which is an area that has grown substantially in recent times. The collapse during 2025 of First Brands Group and Tricolor Holdings in the USA have highlighted concerns in this regard and given rise (not unexpectedly) to reported civil and criminal investigations in both cases. These failures have firmly placed the spotlight on the potential downsides of private credit (for example, weak lender protections, high leverage and limited transparency), with the concern being that where there is one company with these (private credit related) issues then there may well be others in the globally interconnected financial ecosystem.  This is an area that financial and regulatory authorities around the world are looking at presently, including the threat of systemic risk.  If there is a deeper problem, or more failures of the types mentioned occur, then one can expect heightened D&O claims as directors and officers are scrutinised and face fall out in the ways we have described above.