For those who, like me, watch bankruptcy filing developments for signs about the current and possible future state of the economy, recent data may be worrisome. Just Monday, the Wall Street Journal cited two recent auto parts companies’ bankruptcy filings as evidence of potential trouble in the U.S. credit markets, saying the developments and raising concerns that “something more profound is ailing American borrowers.” Consistent with these concerns, a recent report from Cornerstone Research shows that large company bankruptcy filings are indeed trending upward, with the largest increases in the most recent period. Signs are that these trends will continue going forward, as well.

The September 24, 2025, Cornerstone Research report, entitled “Trends in Large Corporate Bankruptcy and Financial Distress: Midyear 2025 Update,” can be found here. Cornerstone Research’s September 24, 2025, press release about the report can be found here.

The Cornerstone Research Report

The Cornerstone Research report is based on the firm’s analysis of bankruptcy filings of firms with assets over $100 million. The report also separately looks at filings of companies with over $1 billion in assets, what the report calls mega bankruptcies. The report’s analysis is based on comparisons of twelve-month periods running from July 1 in the prior year to June 30, meaning that the most recent period the report considers runs from July 1, 2024 to June 30, 2025 and compares that 12-month period to equivalent prior twelve month periods.

According to the report, in the twelve months ending June 30, 2025, there were 117 large bankruptcy filings, representing a 4% increase over the 113 large filings in the preceding twelve-month period. The figures for the most recent period represent the third consecutive twelve-month period increase. The 117 large filings in the most recent twelve-month period represents a 44% increase over the historical twelve-month average of 81 between 2005 and 2024.

Of arguably greater significance than the 4% increase in filings in the most recent twelve-month period is the fact that the 59 bankruptcy filings in the first half of 2025 were nearly 50% higher than the historical semiannual average of 41 filings between 2005 and the first half of 2025. In other words, recent large bankruptcy filings are up significantly in the most recent semiannual period compared to long term semiannual historical averages.

With respect to so-called mega-bankruptcies (that is, involving companies with assets over $1 billion) the figures show similar filings trends. In the twelve-month period ending June 30, 2025, there were 32 mega bankruptcies, an increase from 24 in the preceding twelve-month period, and well above the 2005-2024 annual average of 23. Of arguably even greater significance, there were 17 mega bankruptcies in the first half of 2025, the highest number in any half-year period since the COVID-19 outbreak in 2020.

And further with respect to the mega bankruptcy filings in the twelve months ending on June 30, 2025, the most commonly cited causes of financial distress were: (i) impacts of high inflation; (ii) reduced demand due to consumer preferences or market competition; (iii) high interest rates; and (iv) challenges in the regulatory, legal, and policy landscape.

This last point – relating to challenges in the regulatory, legal, and policy landscape – is, to me, particularly interesting. According to the report, filers citing these concerns most often related to “public policies involving renewable and clear energy or international trade and tariffs.”

The report quotes several filers with respect to the trade and tariff issues, for example citing one mega filer as having said that “introduction of broad-based tariffs caused significant unpredictability and disruption to the retail industry and put retailers… in a difficult operating position.” Another mega filer, an auto parts supplier, is quoted as having reported that the company “was severely affected by tariffs due to its import/export focused business and the imposition of tariffs specifically against automotive manufacturers and suppliers.”

In the twelve months ending June 30, 2025, the industry sector with the highest share of bankruptcy filings was the Manufacturing Industry, accounting for 30% of the filings across all industries. Among the twelve mega bankruptcies in the Manufacturing industry, challenges in the regulatory, legal, and policy landscape were the most commonly cited driver of financial distress. One such company cited “the macroeconomic headwinds associated with the imposition of tariffs in countries around the world” as one of the drivers of its financial distress.

Looking Ahead

As troubling as the statistics are for the twelve months ending June 30, 2025, signs are that the financial distress that led to the elevated level of filings during that period are likely to continue as we finish out 2025 and head into 2026.

A number of factors may contribute to these circumstances, including, among other things, continued elevated interest rates; record levels of household debt and increasing consumer delinquencies; stubbornly elevated inflation levels (including for example for food products); and the exhaustion of pandemic-era buffers (including, among other things, pandemic-era forbearance on educational debt).

In addition to those other factors, another key factor going forward will be the current administration’s tariff policies, especially those targeting Chinese imports, steel, aluminum, pharmaceuticals, furniture, and trucks. As discussed at length here, tariffs have raised operating costs, disrupted supply chains, and forced companies to either absorb costs or pass them to consumers—both of which reduce demand and profitability. A quick survey of recent headlines suggests that the industries that are likely to be hit hardest include: retail and consumer goods; casual dining and restaurants; manufacturing; automotive; furniture and home goods; healthcare and pharmaceuticals; and agriculture and food production.

Given what the Cornerstone Research report said about the causes of financial distress, and in particular that references to the impact of tariff and trade policies, it doesn’t seem like a stretch to say that in the upcoming financial periods, tariffs will continue to be a source of financial tension and potentially a contributing factor in bankruptcy filings.

The pressure from tariffs may be felt most acutely with respect to smaller businesses. In that regard, it is worth noting that the Cornerstone Research report is focused on larger businesses, but it may be smaller businesses that are feeling the stresses the most.

A September 30, 2025, New York Times article entitled “Small Businesses Wither Under Trump’s Tariffs” (here), notes that the tariffs are hitting small businesses particularly hard. Among other things, the article states that “President Trump’s tariffs are straining the backbone of the United States economy.”

Whereas many larger businesses have flexibility to help them adapt to the tariffs, many smaller businesses do not – as, for example, smaller businesses are much more likely to source their goods from a single country or even a single source than are larger businesses. The Times article quotes one analyst as saying that “Small importers may be relatively more constrained in their ability to weather higher trade costs or switch suppliers, and, as a result, might experience defaults and bankruptcies.” 

The Times article notes further that most economic data does not yet reflect the strain from tariffs that small businesses are under, in part because many of the most onerous tariffs have only been in place since August. In other words, there may be worse trouble ahead than we have seen in the recent past, particularly among small businesses. Economists expect more evidence to emerge once the tariffs have been in place longer. And of course the current data do not reflect the impact of the new 100% tariffs that President Trump announced last Thursday with respect to drugs, furniture, and trucks.

The challenge for D&O Insurance underwriters is that at the moment we are in the midst of a slow-motion and slowly developing emergence of financial distress for at least some companies, distress of a kind that could indicate at a minimum a continuation of the current trend toward increased numbers of bankruptcy filings. The fact is that for many businesses, especially smaller business, the full impact of the tariffs is yet to be felt. That makes the task of underwriting for the next twelve months of any given business enterprise particularly challenging.

For now at least it seems that D&O underwriters should not only – as they would be doing in any event and in the ordinary course – considering the impact on businesses of high interest rates and economic inflation on a firm’s likely future financial performance. The underwriters will also have to consider the likely future impact on the enterprise of the tariffs, many of which have only recently been increased.

The bottom line for me is that the upcoming financial reporting periods, financial risk, arising from a host of factors including the impact of the tariffs, is likely to be a significantly more important concern, in a period in which signs suggest bankruptcies are likely to be increasing.