Liability Risks for Executives in 2026
Geopolitical uncertainties, ongoing conflicts, and a growing number of major bankruptcies are leading to rising liability risks for board members and supervisory board members worldwide. This is the conclusion reached by the recently published Allianz D&O Insurance Insights Report from December 2025. Starting in 2026, Directors and Officers Liability Insurance (D&O insurance), cybersecurity, AI compliance, and new regulatory requirements will come to the forefront. In this article, attorney Fürstenow explains which other factors are exacerbating liability risks and what additional obligations this entails for managers.
Key Focus Areas for Executives in 2025 and 2026
The main drivers of rising liability risks for managers worldwide are:
Insolvencies & Geopolitics
According to the Allianz D&O Report, insolvencies and regulatory actions are among the most common causes of D&O lawsuits. A further increase is expected for 2026, particularly in sectors such as automotive, construction, retail, and consumer goods. At the same time, geopolitical conflicts, such as those in Ukraine or the Middle East, are putting global supply chains and operational processes to the test, meaning executives can be held liable for misjudgments, explains attorney Fürstenow.
Cybersecurity & AI
New technologies such as artificial intelligence and digital systems bring additional liability risks. Executives must ensure that AI decisions are transparent and legally sound. At the same time, the responsibility for cybersecurity is growing, as IT failures or security breaches can lead to financial losses and D&O lawsuits. Data breaches are also a cause of legal disputes.
In addition, attorney Fürstenow emphasizes that managers should regularly update their knowledge of technological risks. The rapid development of AI tools and digital processes requires active monitoring, risk management, and legally compliant documentation of decisions to avoid personal liability.
Regulatory Changes & ESG
Regulatory requirements, ESG obligations, and climate targets are increasing the liability of board members. Errors in ESG reporting, inadequate climate strategies, or allegations of greenwashing can result not only in legal risks but also in significant reputational risks.
This year alone, key phases of various ESG laws will come into effect in the EU, which must be monitored and managed by executives. Many standards that were previously voluntary will become mandatory. In particular, this concerns the EU Supply Chain Directive, which must be implemented by July 2026. The aim is to verify that all human rights and environmental due diligence obligations are observed throughout the supply chain. Additionally, starting in 2026, more companies will be required to prepare sustainability reports in accordance with EU standards.
Greater Accountability
Starting in 2026, managing directors, board members, and supervisory board members will face stricter obligations and responsibilities.
More Active Oversight and Disclosure Requirements
Supervisory board members must perform their monitoring duties more proactively. In its ruling of October 14, 2025, the Federal Court of Justice (BGH) also clarifies that supervisory board members only fulfill their monitoring duties if they actively seek out information and do not accept inadequate reporting by the executive board under Section 90 of the German Stock Corporation Act.
Compliance and Risk Management
Due diligence obligations include, in particular, cyber and AI risks as well as regulatory IT governance. Compliance management systems must be effective and regularly monitored and reviewed by the executive board and supervisory board. This applies in particular to DORA requirements, the EU AI Act—which will already regulate key prohibitions starting in February 2026—and new transparency and reporting obligations regarding ESG targets.
New Liability Risks from EU Pay Transparency
With the implementation of the EU Pay Transparency Directive starting in June 2026, companies are required to meet extensive transparency and reporting obligations regarding pay equity. One of the changes is the reversal of the burden of proof regarding pay discrimination. From now on, it is not employees who must prove unequal treatment, but employers who must prove that pay differences are based on objective reasons, explains attorney Fürstenow. The supervisory board must actively monitor the implementation of the EU directive. Failure to do so may result in personal liability.
Focus on D&O Insurance
Due to rising liability risks, D&O insurance is gaining attention as a means of providing coverage in potential liability scenarios.
D&O insurance is a type of executive liability insurance that protects the personal financial liability of executives, managing directors, board members, and supervisory board members against claims for damages from their own company or third parties in the event of professional missteps. D&O insurance also serves a legal protection function and covers the costs of attorneys and expert witnesses. This type of insurance originated in the U.S., but demand for D&O insurance is also growing in Germany. In 2023 alone, D&O insurers reported approximately 2,200 claims, with the number of cases rising to over 2,500 in 2024.
According to Allianz, D&O lawsuits have increased in the U.S. over the past three years. Settlement costs in the U.S. rose by 27% to $56 million in the first six months of 2025.
While D&O insurance serves as protection for executives in both the U.S. and Germany, it does not provide protection against everything. In particular, it does not apply to intentional or criminal acts, personal misconduct, or certain types of contracts. These insurance policies are therefore not all-encompassing and do not replace the monitoring and fulfillment of due diligence obligations by executives.
Conclusion for Executives, Managing Directors, Board Members, and Supervisory Board Members
In summary, it can be said that starting in 2026, both liability risks and due diligence obligations for managers will increase. There will be a greater need for more active oversight functions and effective risk management, particularly in the areas of cybersecurity and AI. According to attorney Fürstenow, executives will therefore be expected to play a more active and risk-aware role.
Added to this are the liability risks arising from ESG laws, with a focus on flawed sustainability reports, breaches of due diligence in the supply chain leading to human rights violations or environmental damage, as well as greenwashing risks. ESG risks must also be considered part of corporate governance, and companies must prepare to establish processes for the accurate collection of key ESG data for reporting purposes.
Documenting decisions is also key to defending against allegations in the event of a loss or conflict of interest. With the help of an attorney, you can determine what information requires documentation and how it should be retained. In particular, it is advisable to have legal representation in D&O insurance claims and to seek legal advice regarding new regulations that executives must adapt to.
This legal advice, particularly regarding the list of risks and obligations, does not claim to be exhaustive but is intended to provide a general overview of the wide range of regulations that executives, managing directors, board members, and supervisory board members in particular will need to address in 2026 and beyond if they wish to avoid liability risks.
Attorney Sascha C Fürstenow will be happy to advise you on this topic and offers a free and non-binding initial assessment of your case in advance.
The legal advice in German was prepared by Ms. Dastan, an employee of the FÜRSTENOW law firm, and reviewed and finalized by attorney Fürstenow.