D&O Pricing Cycle Softening in India 2026: After the Hard Market, Where Terms Are Heading for Listed Companies and Start-ups

Directors-and-officers liability is a cyclical class, and in 2026 the Indian D&O market is in the softening phase of a cycle whose hard phase ran roughly from 2020 to 2023. Understanding where the market sits, and why, is the starting point for any buyer's renewal strategy, because the direction of the cycle changes the negotiating position between buyer and insurer fundamentally.

A brief recap of the cycle is useful. Through roughly 2020 to 2023 the global and Indian D&O markets hardened sharply: rates rose, sometimes steeply, capacity tightened, retentions (deductibles) increased, terms narrowed, and some buyers found cover hard to place at all, particularly for higher-risk profiles. From around 2023 to 2024 the market began to turn, and through 2025 and into 2026 the softening has become established: capacity has returned, competition has intensified, rate increases have stopped and reversed for many buyers, and terms have begun to loosen. The market in 2026 is materially more favourable to buyers than it was at the peak of the hard market, though the softening is uneven across buyer segments and the underlying exposures that drove the hard market have not disappeared.

The practical significance is a reversal of bargaining power. In a hard market the insurer holds the upper hand, capacity is scarce and the buyer takes what terms are offered. In a softening market the buyer regains the upper hand, capacity is available, insurers compete, and the buyer can push on rate, retention, limit, and terms. The Indian D&O buyer in 2026, listed company, start-up, or unlisted corporate, is renewing into a market that has turned in its favour, and the renewal strategy should be built around that turn. But the softening is not uniform, the drivers that hardened the market remain live, and a buyer that mistakes a cyclical softening for the permanent disappearance of D&O risk will under-buy. This piece works through what hardened the market, what is softening it, the coverage structure that the negotiation turns on, where terms are heading by segment, and how to renew well.

The hard market did not arise from nothing; it was a correction to a build-up of D&O loss and exposure, and the drivers that caused it explain both why it hardened and why the softening is partial rather than complete.

Securities-litigation and regulatory-enforcement exposure

The core driver was a rise in the exposure that D&O insures: claims against directors and officers arising from securities litigation, regulatory enforcement, and governance failures. Globally, securities class actions and regulatory actions drove D&O losses. In India, the exposure profile is different in shape, the classic US-style securities class action is less developed, but the direction was the same: rising regulatory enforcement, a more assertive securities regulator, and growing scope for claims against management.

SEBI enforcement and a more assertive regulatory posture

The Securities and Exchange Board of India (SEBI) has become markedly more assertive in enforcement, investigation, and the pursuit of individual accountability for directors and officers, in matters of disclosure, governance, insider trading, related-party transactions, and corporate misconduct. SEBI actions, investigations, show-cause notices, penalties, and proceedings against named individuals, are a primary driver of Indian D&O claims and notifications, and the rising tempo and assertiveness of SEBI enforcement through the hard-market years drove both losses and underwriting caution.

IPO-related and listing liability

The wave of Indian IPOs, including large new-economy and start-up listings, created a distinct liability exposure. An IPO exposes directors and officers to claims arising from the offer documents, the disclosures, and post-listing performance against the prospectus, and IPO-related D&O is a higher-risk segment that underwriters priced cautiously. The IPO boom both increased the population of newly-listed companies needing D&O and increased the perceived riskiness of the class.

Reinsurance tightening and the global cycle

D&O capacity in India depends substantially on reinsurance, and the global reinsurance tightening of the hard-market years flowed through to Indian D&O. As global reinsurers raised rates and tightened terms on financial lines, Indian insurers writing D&O on reinsurance support passed the tightening through, contributing to the rate rises and capacity constraints. The Indian D&O hard market was, in part, an importation of the global financial-lines hard market through the reinsurance chain.

The combination, rising claims exposure, an assertive SEBI, IPO liability, and reinsurance tightening, produced the rate rises, capacity tightening, and term narrowing that defined 2020 to 2023. The key point for the present cycle is that several of these drivers, SEBI assertiveness, governance-claim exposure, IPO liability, are structural and have not gone away. The softening is being driven by supply-side changes (capacity, competition), not by the disappearance of the underlying risk.

The softening of 2025 to 2026 is primarily a supply-side phenomenon: the market hardened to a point that attracted capacity and competition, and the return of capacity is now pushing rates and terms the other way.

Returning capacity

The most important softening driver is the return of capacity. The hard-market rate levels made D&O an attractive class to write, which drew capacity back, existing insurers grew their appetite, capacity that had retreated returned, and reinsurance support loosened as the global financial-lines reinsurance cycle turned. When capacity exceeds demand at the prevailing rate, insurers compete for business by cutting rate and improving terms, which is the mechanism of a softening market.

New entrants and MGAs

The broadening of the Indian market, new entrants, the growth of the managing general agent (MGA) model with delegated underwriting authority for financial lines, and the entry and expansion of specialist financial-lines capacity, has added competition specifically in the specialty classes that include D&O. New capacity entering a class intensifies competition and accelerates softening, and the MGA and specialty-capacity growth is feeding directly into D&O competition. The foreign-reinsurer entry and GIFT City access that have broadened the Indian capacity base also reach D&O and financial lines.

Competition and the rate correction passing

With capacity returned and competition intensified, the rate trajectory has reversed. The steep increases of the hard market stopped, rates flattened, and for many buyers rates have begun to fall, with retentions easing and terms loosening from the narrow hard-market positions. The market is correcting from the hard-market peak toward more buyer-favourable levels, and the competition among insurers for good risks is the engine of that correction.

The limits of the softening

The softening is real but bounded, and a buyer should understand the limits. First, it is uneven by segment, large listed companies, higher-risk profiles, and IPO-related risks soften less than clean, lower-risk profiles. Second, the underlying exposures remain, an assertive SEBI, governance-claim risk, IPO liability, and emerging ESG and cyber-related D&O exposure mean insurers are competing on price and terms but are not pricing the class as risk-free. Third, a softening market can correct quickly if a wave of losses materialises, so the current favourable conditions are cyclical, not permanent. The buyer benefits from the softening but should not treat it as a reason to under-buy a risk that remains structurally live.

D&O negotiation, in any market phase, turns on the coverage structure, and the buyer who understands the Side-A, Side-B, and Side-C distinction negotiates the soft market far better than one who treats D&O as a single block of cover.

A D&O policy is conventionally built around three insuring agreements:

1. Side A covers the individual directors and officers directly for loss (defence costs, settlements, judgments) where the company cannot or does not indemnify them, because it is insolvent, legally prohibited from indemnifying, or refuses to. Side A protects the personal assets of the individual director or officer and is the cover the individuals care about most, because it responds precisely when the company's indemnity fails them.
2. Side B reimburses the company when it indemnifies its directors and officers, the company pays the director's loss under its indemnification obligation, and Side B reimburses the company. Side B protects the company's balance sheet for the indemnification it provides.
3. Side C (entity cover) covers the company itself for its own liability, in India and globally most commonly for securities claims against the company (entity securities cover), which is why Side C is most relevant for listed companies exposed to securities-type claims.

The structure matters for negotiation because the three sides have different risk profiles and the buyer can structure cover to prioritise what matters. The individual directors' protection (Side A) is the irreducible core, it is what a director joins a board expecting, and sophisticated buyers increasingly secure dedicated Side-A-only or Side-A DIC (difference-in-conditions) cover that sits above the main programme and responds when the main programme is exhausted, eroded, or unavailable, giving the individuals a protected layer that cannot be consumed by company-level (Side C) claims. In a softening market, the buyer has the room to improve all three, but should think hardest about the Side-A protection that ultimately matters to the people on the board.

The interaction with the entity cover is a structuring point. Side C entity-securities cover shares the programme limit with Side A and Side B, so a large entity-securities claim can erode or exhaust the limit and leave the individual directors exposed, which is exactly why dedicated Side-A cover exists, to ring-fence the individuals' protection from entity-claim erosion. A listed company buying significant Side C should consider whether its Side-A protection is adequately ring-fenced, and the soft market is the time to secure or improve that ring-fencing on good terms.

The allocation, retention, and exclusion architecture (the conduct exclusions, the insured-versus-insured exclusion, the allocation of loss between covered and uncovered matters, the regulatory-investigation and inquiry costs cover) is where much of the real negotiation happens, and the soft market gives the buyer room to push on these wording points, broader investigation-costs cover, narrower conduct exclusions, better allocation provisions, not just on price.

The softening is not uniform, and the trajectory differs sharply by buyer segment, so a buyer should locate itself in the segmentation to understand what it can realistically achieve at renewal.

Large listed companies

Large listed companies carry the most D&O exposure, securities-type claims, SEBI enforcement, disclosure liability, entity (Side C) exposure, and they soften less than cleaner risks because the underlying exposure is real and underwriters remain disciplined on the segment. But even here the softening is meaningful: rates have come off the hard-market peak, capacity is available, and the buyer can push on retention, limit, and terms. Listed companies should use the soft market to secure adequate limits (the persistent exposure justifies high limits), ring-fence Side-A protection, and improve wording (investigation costs, conduct exclusions, allocation), rather than simply bank a rate reduction. The IPO-related sub-segment remains a higher-risk and less-soft pocket; companies in or near an IPO should expect more cautious underwriting than seasoned listed companies.

SMEs and unlisted corporates

Unlisted companies and SMEs carry a different and generally lower D&O exposure, less securities-claim risk, more employment-practices, creditor, regulatory, and management-liability exposure, and they benefit from the soft market with more available capacity and competitive pricing. For these buyers the soft market is an opportunity to secure or upgrade D&O (and the broader management-liability package that often bundles D&O with employment-practices and other covers) on good terms. Many unlisted Indian companies remain under-insured for D&O relative to their actual governance and regulatory exposure, and the soft market is a good moment to close that gap at favourable pricing.

Start-ups and new-economy companies

Start-ups and new-economy companies are a distinct and growing D&O segment with their own risk profile, investor and shareholder disputes, down-round and governance litigation, regulatory exposure in regulated sectors (fintech, healthtech), and IPO exposure for those approaching listing. The funded start-up ecosystem has made D&O close to a standard requirement, investors and boards expect it, and the soft market makes it more accessible and affordable for start-ups than it was at the hard-market peak. Start-ups should secure D&O appropriate to their stage and sector, with attention to the Side-A protection for individual directors (founders, investor-nominee directors, independent directors) who join the board on the expectation of protection. The pre-IPO and IPO transition is the point where a start-up's D&O needs step up sharply, and the programme should be built with that transition in mind.

Across all segments, the soft market improves access, price, and terms; the segment-specific point is simply where on the spectrum each buyer sits, from the disciplined underwriting that still applies to large listed and IPO risks to the more competitive pricing available to clean unlisted and SME profiles.

For a buyer renewing D&O in the soft market of 2026, the strategy is to use the favourable cycle to build a stronger programme against a risk that is not going away, and to position for the emerging exposures that will shape the next phase.

Renewal strategy in a soft market

The soft-market renewal playbook for a D&O buyer:

1. Push on terms, not just price. With insurers competing, press on retention, limit, investigation-costs cover, conduct-exclusion narrowing, allocation provisions, and Side-A ring-fencing, not only on rate. Improved wording locked in during a soft market persists into the next hard market.
2. Secure adequate limits. The soft market makes higher limits affordable; size the limit to the persistent exposure (SEBI enforcement, governance and disclosure liability, the emerging ESG and cyber dimensions), not to the temporarily lower price.
3. Ring-fence Side-A protection. Secure or improve dedicated Side-A or Side-A DIC cover so the individual directors' protection cannot be eroded by entity-level claims, the soft market is the time to add this on good terms.
4. Market the renewal. With capacity available and insurers competing, a properly-marketed renewal (multiple insurers, a well-presented submission) extracts better terms than a passive roll-over.
5. Lock in multi-year stability where available. Where insurers offer multi-year or rate-stabilised terms, a buyer may secure soft-market pricing against the next hard market, though the trade-offs should be weighed.

Emerging exposures shaping the next phase

Two emerging exposures will shape D&O risk and pricing going forward and should inform how a buyer builds cover now:

• ESG and climate disclosure. As SEBI's ESG-disclosure framework (the Business Responsibility and Sustainability Reporting, BRSR, regime, including BRSR Core and value-chain disclosure) matures, directors and officers face growing exposure to claims arising from ESG and climate disclosures, greenwashing allegations, inaccurate sustainability reporting, and governance of climate risk. ESG-related D&O is an early-stage but growing exposure, and a buyer should ensure its D&O responds to disclosure liability arising from the expanding ESG-reporting obligations.
• Cyber-related D&O. A serious cyber incident can produce claims against directors and officers for the governance and oversight of cyber risk, the response to a breach, and related disclosures, distinct from the company's own first-party cyber cover. As cyber incidents and the regulatory expectations around cyber governance grow, cyber-related D&O exposure grows with them, and the buyer should understand how its D&O interacts with this exposure.

The forward view

The soft market is cyclical and will not last indefinitely; capacity and competition can tighten again if losses materialise, if SEBI enforcement intensifies, if a wave of ESG or cyber-related claims emerges, or if the global financial-lines reinsurance cycle turns. The buyer who uses the current window to build a strong, well-structured programme is far better positioned than one who simply banks the lower price.

Much of what the renewal turns on, technically, is the wording: how the Side-A, B and C agreements are framed, how the conduct exclusions and allocation provisions read, and how investigation costs and ESG and cyber exposures are treated. Because a softening market puts several competing insurers in play, the buyer's advisers should compare these wordings carefully across carriers rather than accept a single insurer's standard form, and secure the broadest terms the cycle allows.