Based on the perspective of risk taking and insurance hedging, this paper investigates the effect of the directors’ and officers’ liability insurance on the deviated strategy and its mechanism. It is found that the risk hedging effect of the directors’ and officers’ liability insurance helps managers to implement the deviated strategy. In private enterprises and enterprises with higher litigation risks, directors’ and officers’ liability insurance plays a stronger role in risk taking. When the executive overseas experience is used as an instrumental variable to control potential endogenous problems, the conclusions remain robust. The analysis of impact mechanism shows that the directors’ and officers’ liability insurance mainly affects the management’s implementation of the differentiation strategy through the “incentive effect” rather than the “self-interest effect”. Further analysis shows that companies that purchase directors’ and officers’ liability insurance have higher level of risk bearing, stronger strategic aggression and more R & D innovation (R & D patents and appearance patents). To sum up, this paper, from the perspective of risk hedging, has enriched the relevant literature on the directors’ and officers’ liability insurance and the deviated strategy, which helps us to understand the corporate governance effect of the directors’ and officers’ liability insurance, and provides empirical evidence for the comprehensive promotion of the directors’ and officers’ liability insurance and the selection of corporate strategic decisions.