Hiscox’s Klee Meakins, D&O Underwriter and Michael Ehioze-Ediae, Senior Claims Underwriter look at why securities class actions were seemingly on the wane but re-emerged in 2025, and what this trend means for Australian corporates and the directors and officers’ insurance market.
For those who thought securities class actions in Australia were becoming increasingly uncommon, 2025 saw some notable cases and whether the plaintiffs win or lose, the defence costs alone could be high. In addition, older directors and officers’ (D&O) insurance claims are developing later bringing new challenges, while the view that settlements are gone from the Australian D&O insurance market has also been overplayed.
It all adds up to a need for the corporates who buy D&O cover to ensure that there is no complacency when considering the risk of a securities class action impacting their organisation and directors and officers, while recognising the value of their D&O policy in dealing with this type of litigation. For insurers, this uptick in securities class actions requires a calm, measured approach to ensure pricing does not fall below sustainable levels.
A good year for the defence
Why, though, did 2024 seem to be a quieter year for Australian securities class actions in comparison to previous years? It’s worth mentioning that class actions in general never went away but there was perhaps more of a focus on other areas such as consumer class actions. From the perspective of securities class actions, however, one of the key reasons for the downturn was the success defendants have had in recent years with six cases going to judgement and finding in their favour, taking the edge off the appetite for more securities class actions to go to court.
A consistent issue mentioned by the courts for plaintiffs not securing judgements in their favour was a failure to clearly explain how the allegations or infractions caused loss. There are two barriers to clear for a securities class action to be successful in Australia. Firstly, it’s necessary to prove that a director or officer did something wrong, such as a breach of duty in failing to disclose an accounting irregularity. That argument has historically been relatively easy for plaintiffs to win. Secondly, it’s also necessary to demonstrate and show a causal link between the wrongful act of the directors and the loss suffered by the plaintiffs. It’s this failure to prove that link that made 2024 a good year for the defence.
A reversal in 2025
The rumours of the demise of the Australian securities class action were, however, greatly exaggerated. While 2024 was a slow year there were still five securities class actions and we should not overlook the number of cases that are settled out of court (since 2003 over 50 cases have been resolved this way). In 2025 alone there were eight settlements from a range of historic securities class actions. Lastly, 2025 was a busy year with six securities class actions filed, the highest frequency since 2015.
Establishing causal link
What’s changed to persuade potential litigants and their funders that they can succeed where recent securities class actions before them have failed? Many have realised that they need to provide more detail and proof to establish how a director or officer’s wrongful acts have directly caused them a loss. It's probably the case that recent wins by defendants in securities class actions have given plaintiff lawyers and funders a blueprint on how to bring a case with a better chance of success.
A judgement in favour of a major bank in 2024 relating to two consolidated shareholder class actions, for example, might have been a loss for the plaintiffs but the judgement fuelled optimism for future actions. An appeal on the same case was heard by the Full Court in May 2025 and, while still upholding most of the original verdict, it gave the claimants some comfort that though they had failed to overturn the original judgement, they were heading in the right direction, albeit with no damages awarded.
New judges, new optimism
Another factor for optimism for those bringing these actions could also be the appointment of new judges to the Federal Court of Australia, with a view that they may be more plaintiff friendly. There are already instances where judges have hinted that they will lower the threshold for what evidence is considered when it comes to meeting Australia’s continuous disclosure rules, which require directors and officers to notify shareholders of material issues that might affect the value of their shares. It could be that funders and plaintiffs who have been sitting in the shadows waiting for more clarity before bringing their actions, are now taking all these factors into account and are more confident of success.
What this means for corporates
Given the seemingly greater chance of success for claimants bringing securities class actions, it shouldn’t be forgotten that appeals are ongoing, what does this mean for corporates and their directors and officers? It’s a clear signal that the risks to the corporate entity and their directors and officers are still very much alive and should be seen as part and parcel of what it means to be a publicly listed business in Australia. Some businesses may not fully appreciate the risks involved and tend to concentrate more on the cost of insurance when it comes to potential D&O risks, instead of considering the broader role and benefits that such coverage can provide in managing potential exposure. They may also overlook the value of protecting the corporate entity itself against claims with the addition of Side C coverage in their D&O policy which can meet potential defence costs and other expenses.
Volatility fuels opportunities for plaintiff firms
While the Australian economy is strong, we also should not ignore headlines of global uncertainty and volatility in the stock markets. As companies adapt to changes in regulation, geopolitics and technology, mistakes and omissions could create opportunities for plaintiff firms who may have a deep pool of opportunities to act on when the time feels right. The possibility of other types of claims emerging shouldn’t be discounted either related to complexities such as bankruptcies, regulatory responses to ESG governance and AI.
Implications for insurers
For D&O insurers, it’s a warning that the market must not allow premiums to drop to an unsustainable level. For years the D&O market in Australia was critically underpriced with a high frequency of claims and poor underwriting from some markets looking to build market share and pushing the price down to below the minimum needed.
Then the price of cover went up by a significant amount before coming down again in the last few years and continuing to drop today which, given the continued claims notifications, could take the market to unsustainable levels. Pricing adequacy is a fundamental requirement for a healthy market and is not just an imperative for D&O insurers but also the corporates who rely on access to a stable and sustainable D&O insurance market.
Don’t overlook derivative actions
One final consideration not to be overlooked by insurers and corporates alike is the possible rise of derivative actions which arise when shareholders sue the directors on behalf of the company, alleging that the board’s conduct has caused the company to suffer a loss. These have long been considered unlikely to move from theoretical to actual, however, a recent test of derivative actions in the New South Wales Supreme Court is not likely to be the last we’ve heard of this instrument. While the suit was dismissed, that judgement was largely based on what may be described as technicalities meaning it is possible that future derivative suits will be accepted by the courts, further increasing the exposures that D&Os face.
Can your insurer handle an Australian SCA claim?
Against this complex risk backdrop, businesses need to be sure that the D&O insurer they work with has the capability to thoughtfully underwrite Australian businesses and handle Australian securities class actions and other risks like derivative actions, with the necessary claims expertise that can be so critical in securing the best outcomes for corporates and their directors and officers. It is why London continues to be the best home for complex D&O risks, with its hard-won experience and strong history of paying claims.
