The Rising Edge 2025 Forecast
Is there enough “I” in “AI”?
The Rising Edge 2025 Forecast was compiled and written by Owen Dacey.
The widespread use of Artificial Intelligence (AI) will continue its transformative impact across industries, driving significant debate within the D&O community in 2025 on how to risk assess the impact of the use of AI by businesses. As AI adoption accelerates, so too will the complexity of its associated risks for businesses – regulatory, operational, and reputational. Companies will grapple with the implications of AI on their operations, employees, customers, shareholders and broader stakeholders. Let alone be tempted by AI-washing. However, a lack of consistent global regulation will create an uncertain legal landscape, increasing the risk of litigation. This will be most prominent in the US Securities Class Action arena, where negative announcements or event about AI, will lead to stock price drops.
Questions have been asked in the last decade about Boards’ ability to assess cyber risk readiness. The complexity that AI innovation potential brings will widens the tech’ knowledge gap at Board level, and we predict that D&O underwriters will struggle too, to risk assess the role AI plays in affecting the risk quality.
Our view: use of AI and statements about AI will surely lead to security class actions in the US. Internationally, we expect an increase of data privacy related regulatory investigation, and derivative actions. We expect a bonanza year for Non-Executive Directors that can spell out AI!
[disclosure: this was not written by Chat GPT].
What’s the future of DEI?
The Corporate world will face continued scrutiny regarding Diversity, Equity, and Inclusion (DEI) initiatives in 2025, in particular in the United States, where the challenges have been mounting throughout 2024. A rising backlash has already led many companies to roll back DEI policies, particularly in the US, with the shift amplified by the political climate and the return of Donald Trump to the White house, with the support (or capitulation) of several tech giants’ CEOs.
Will we see the same trend beyond the US? Signs indicate that possibly not - such as in the UK, where we see a Labour Government introducing laws which arguably move the agenda in the opposite direction. To add further complexity, companies moving in one direction does not always match to the hopes and expectations of society, and most importantly for companies, expectations of their employees. Good luck for businesses (and their Directors!) operating across various jurisdictions with opposite views on DEI and ESG!
Our view: we believe that the backlash against DEI (and ESG in general) will lead to legal inconsistencies with existing anti-discrimination and climate change laws and regulations, putting the burden on courts to draw the line. This will translate in increased employment relation disputes, regulatory investigations, shareholder litigation and activist led actions, including through litigation-funded and crowd-funded activism.
2025: the IPO/M&A come back?
We hope so!, as we have just launched our own Transactional Liability offering! Now, the press is reporting that with the interest rate market conditions stabilising, 2025 will see a surge in Initial Public Offerings (IPOs) and Mergers & Acquisitions (M&A), with the US continuing the recovery signs seen in 2024, and the rest of the world following. Private Equity firms are expected to lead the charge, with more mega-IPOs (valued over $750 million) expected. So all good, right?
Our view: we are cautious, as some of that optimism might be wishful thinking, coming from people desperately needing such resurgence. We believe that the expected IPO and M&A boom will be tempered by ongoing geopolitical uncertainties and market volatility. Yet, there will be more opportunities, but given the macro context, whether D&O or W&I insurance, it will demand greater expertise and discipline to underwrite. Bring it on!
AI or Quantum Computing
-Driven ‘Black Swan’ Cybersecurity Event?
While quantum computing may still be on the distant horizon, the rapid development of AI will likely enable bad actors to execute sophisticated crime and cyberattacks across multiple industries, including finance, healthcare, energy, and telecommunications.
Our view: we anticipate a significantly increased frequency and severity of tech led crime. The fallout will include D&O litigation as companies face legal action from impacted shareholders and stakeholders. And in 2025, we will possibly see the ever-announced large-scale cyber event that causes significant economic loss and disrupts financial markets.
Wildcard Predictions for 2025
– Expect the Unexpected!
The world is increasingly unpredictable, so we’re embracing the chaos with some wildcard predictions for 2025. Will aliens make contact, at last? Will Elon Musk and Donald Trump have a public falling-out? Could Canada seek refuge by applying to join the EU? Might Greenland be seized and the Panama Canal put under international control? Could there be another global pandemic or Bitcoin surpassing $250,000 (and/or dropping to $10)?
Our view: whatever unfolds, one thing is certain: D&O exposure will continue to be closely tied to global events and to whatever the hot topics of 2025 will be.