Directors and Officers: Risks and insights 2026

The economic picture remains mixed. While there are some encouraging signs, with inflation down to 3.2% in November 2025 and the Bank Rate cut to 3.75% in December 2025 ¹, the economy remains sluggish. UK GDP increased by a lacklustre 0.1% in the third quarter of 2025 ², down from growth of 0.2% the previous quarter.

Companies continue to face multiple pressures. Rising costs, including energy, supplies and wages, are squeezing margins. Demand could also be better; the British Retail Consortium’s Consumer Sentiment Monitor shows that concerns about the economy are holding back spending ³. 

Further pressure will come from changes in employment law under the Employment Rights Act, which was formally approved by Royal Assent on December 2025. While strengthening employee protections, these changes will be rolled out over the next two years and may increase the risk profile for employers.

Geopolitical events are also affecting UK businesses. Escalating global tensions and the increased use of tariffs are forcing many companies to source new suppliers and rewrite business growth plans. 

All this uncertainty increases the risk of a business failing. Figures from The Insolvency Service show that since 2022, company insolvencies have been at levels last seen during the 2008/09 recession ⁴, with more than 22,000 companies going out of business in the first 11 months of 2025.  

High insolvency rates could also fuel legal action against directors and officers. Just the possibility of a business struggling financially can drive investors and other stakeholders to lodge a claim to protect their own interests.

As well as navigating these risks, directors and officers need to keep up to date with evolving and emerging risks. Keeping an eye on these, and managing them appropriately, is essential. 

These are some of the key areas to consider:

Cyber 

Growing reliance on technology; more robust regulation and an evolving threat landscape make cyber risk a major concern for businesses, with it taking top risk spot in the Allianz Risk Barometer ⁵  for the last five years. We explore it from a global lens:  Global Allianz Risk Barometer 2026.

Artificial Intelligence 

Rapid development in artificial intelligence (AI) brings significant opportunities for companies, helping to automate and streamline business processes, increase productivity and improve customer service. The potential is massive. A report commissioned by Microsoft ¹⁰ predicts a £550 billion boost to the UK economy over the next 10 years if it adopts AI and cloud technology.   

But adopting AI also brings risks for directors and officers. AI washing, where false or misleading statements are made about the use of AI, can leave a company open to legal action from investors and regulators. Under the Digital Markets, Competition and Consumers Act 2024, the Competition and Markets Authority has the power to fine a company up to 10% of its global turnover ¹¹ for infringing consumer protection law, which includes AI washing. 

D&O claims could also result from inappropriate use of AI. This may happen where an AI model contains unintended bias or infringes existing privacy and copyright laws.  

For directors and officers, balancing the risk and reward associated with AI is essential. While it can bring competitive advantage, directors need to understand the technology and how it is being used within the company, especially given the speed at which it is developing. 

Forever chemicals

Forever chemicals, which are also known as per- and polyfluoroalkyl substances (PFAS), are an emerging issue for directors and officers, highlighting the importance of constantly scanning the risk horizon. 

First developed in the 1940s, they were seen as wonder chemicals, giving us everything from nonstick frying pans to waterproof clothing and firefighting foams. But there are significant downsides. As well as links to serious health issues including cancer and reduced fertility, these chemicals degrade very slowly. 

This means PFAS are now widely distributed and persistent, with the Forever Pollution Project ¹² finding nearly 23,000 sites across Europe contaminated by forever chemicals.

Research into the effects of these chemicals is still ongoing and while some have been banned, many are still in use. Litigation is likely to drive a faster response from regulators. As an example, in the US, multi-billion-dollar settlements by chemical manufacturers such as 3M ¹³ and DuPont ¹⁴  regarding the contamination of drinking water have resulted in stricter regulation of PFAS. 

Although the UK lags the US on the PFAS regulatory front, the Environmental Audit Committee launched an inquiry in April 2025 ¹⁵ to examine the risks around forever chemicals.  

Alongside the potential for tougher regulation, there’s also a risk of more PFAS-related claims on D&O. As rules shift, directors could face legal action for failing to identify or disclose potential PFAS liability exposures. Understanding the risk and exposures is essential. 

Our range of products are only available through insurance brokers. Speak to your insurance broker today about Directors and Officers insurance.

Understanding and managing these risks is a key part of running a business. A wrong decision can damage a company’s reputation and hit the bottom line hard. 

Directors are personally liable for their actions, which could impact not just their business, but also their personal assets. With companies facing so much change and uncertainty, keeping informed and having cover in place can provide considerable reassurance to directors and officers.

1. Interest rates and Bank Rate: our latest decision | Bank of England
2. Gross Domestic Product (GDP) - Office for National Statistics
3. Consumer Sentiment Monitor - December 2025
4. Commentary - Company Insolvency Statistics November 2025 - GOV.UK
5. Allianz Risk Barometer | Allianz Commercial
6. AI could boost UK GDP by £550 billion by 2035, research shows   - Microsoft UK Stories
7. CMA to boost consumer and business confidence as new consumer protection regime comes into force - GOV.UK
8. The Map of Forever Pollution - The Forever Pollution Project
9. 3M Settlement with Public Water Suppliers to Address PFAS in Drinking Water Receives Final Court Approval :: 3M Company (MMM)
10. $27M DuPont PFAS contamination class action settlement - PFAS Central
11. EAC launches new inquiry to address the risks of PFAS forever chemicals within the UK’s regulatory approach - Committees - UK Parliament