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Survey Report

Insurance Marketplace Realities 2024 – Financial institutions — FINEX

November 9, 2023

The availability of capacity in the marketplace continues to drive competition across all lines of business for financial institutions.
Financial, Executive and Professional Risks (FINEX)
N/A
Rate predictions: Financial institutions – FINEX
  Trend Range
Asset managers D&O/E&O (excluding private equity) Decrease -15% to flat
Bankers professional liability (BPL) Increase Flat to +10%
Insurance company professional liability Decrease -5% to +5%

Professional liability (E&O) market dynamics vary by each subclass of FI business:

Asset managers

  • Program adjustments made to policies over the past few renewal cycles, combined with the continued influx of new capacity, has stabilized the overall asset management D&O/E&O insurance environment.
  • Insureds with favorable risk profiles are realizing renewal premiums of flat to -15%, while maintaining as-expiring retentions and a broad scope of coverage. Registered investment advisors, private fund managers and mutual funds continue to be the most desirable class of business within the asset management sector.
  • Conversely, there continues to be a limited appetite for BDCs, firms with significant exposure to cryptocurrency, private equity funds, and portfolios with meaningful direct or indirect exposure to the middle market banking sector.
  • From an underwriting perspective, both trade errors and regulatory claims continue to be a key area of focus by D&O/E&O insurers. In particular, the steady flow of new rule proposals by the SEC addressing a variety of topics, including ESG, cybersecurity and transparency by private fund managers, are likely to generate additional questions about an insureds’ ability to comply with such rules during the renewal underwriting process.

Insurance companies

  • Rates have been relatively stable in 2023 but there remains limited primary capacity for new ICPL business.
  • Conversely, competition for excess ICPL continues to increase especially when blended with other coverage lines. We expect these trends to continue in the near term though underlying risk factors have not improved.
  • A challenging regulatory environment and climate change are prompting many P&C insurers to exit certain jurisdictions and classes of business, while life insurers grapple with exposures to interest rate volatility and ongoing sales and marketing claims.

Banks

  • Rates and retentions have remained stable with most programs experiencing flat to modest rate increases.
  • One exception area is regional bank programs, which are experiencing increased rate and retention pressure in light of the bank failures and banking system turmoil earlier this year. While more of the recent focus has been on D&O for these banks, insurers have a close eye on the BPL as well.
  • Insurers remain focused on their bank portfolios and are closely underwriting liquidity levels, profitability, deposit flows and mix, funding sources and costs, investment portfolios, credit quality and stress, and loan portfolio mix and performance in higher risk areas, particularly commercial real estate and also multifamily real estate.
  • Increased compliance risk with new proposed regulations and higher capital requirements for banks with greater than $100 billion in assets, “higher for longer” interest rates, lingering inflation, tightening in lending and rising insurance costs for certain borrowers, are recent drivers of BPL claim activity.
  • Regulators are also focused on banks’ climate-related financial risk management programs and how they are measuring and monitoring physical and transition risks; climate-related litigation will evolve and expand and lead to heightened reputational risk.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contact

Jordan Siegman
U.S. Head of FINEX Financial Institutions & Professional Services
email Email phone +1 212 309 0941
Related content tags, list of links Survey Report Financial, Professional and Executive Risks Insurance Financial Institutions United States
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