Insurance Marketplace Realities 2025 – Financial institutions - FINEX

Rate predictions: Financial institutions – FINEX

	Trend	Range
D&O — Primary publicly traded		-5% to flat
D&O — Excess publicly traded		-5% to -10%
D&O — Private		-5% to flat
Asset managers D&O/E&O (excluding private equity)		-10% to flat
Bankers professional liability (BPL)		Flat to +10%
Insurance company professional liability (ICPL)		Flat

Asset managers (excluding private equity firms)

• Asset managers continue to be the most desirable subsector of the financial institution industry. Its generally favorable loss history continues to draw interest from established carriers, as well new entrants, most of whom are eager to provide competitive excess capacity. This surplus of capacity has enabled premiums to renew flat to down 10% through end of August, while also generating opportunities for coverage enhancements under most programs.
• Registered investment advisors, private fund managers and mutual funds continue to be the most desirable classes of business for insurance carriers, though firms with meaningful outsourced chief investment officer (OCIO), cryptocurrency and commercial real estate risk should expect added scrutiny during the renewal process. These favorable market conditions are expected to continue through at least the end of 2024.
• Claim activity under D&O/E&O programs continues to fall within three primary categories: regulatory actions, investor litigation and cost of corrections matters. The SEC continues to focus on issues impacting asset managers, including off-channel messaging, the marketing rule and broker-dealer/bank sweep programs, a reminder that regulatory actions are still a significant risk facing the wider industry. Investor litigation generally alleges breach of investment mandate and/or prospectus misrepresentations, while cost of corrections claims are most often in the form of trade errors. Asset managers should continue demonstrating those applicable risk management and compliance frameworks in place to mitigate these risks, while those with pending claim activity should expect greater scrutiny at renewal.

Insurance companies

• The market for insurance companies has calmed, especially for ICPL, with rates being generally stable. Exceptions to this include programs which have not been marketed during the last several favorable years and those risks which have experienced losses.
• Retentions and capacity are largely unchanged from the prior period. While artificial intelligence remains the most notable emerging trend, insurance companies can expect renewed scrutiny on both cyber exposure and internal controls because of the CrowdStrike outage.
• Market conditions suggest that buyers challenge existing premiums, retentions and policy wording through seeking feedback from alternative carriers while sufficient competition exists.

Banks

• D&O and BPL rates and retentions for banks have remained stable through the first half of 2024. Plentiful capacity and competition persist for D&O, even with the hurdles facing regional banks, resulting in low single-digit rate decreases to flat rate trends through Q2 2024. There was some moderation in D&O rate decreases given that many banks have experienced reductions for the last two to three renewal cycles. Where we saw reduced capacity or upward rate pressure on D&O in the regional banking space, there were additional markets willing to step in with competitive terms.
• BPL capacity is always more limited than D&O, but there generally has been no pullback in capacity, and retentions have remained flat. Key considerations driving BPL rate increases include significant commercial real estate (CRE) loan portfolios, credit quality deterioration, liquidity levels and steps being taken to comply with proposed regulatory changes to capital, liquidity and risk management.
• CRE is a major focus for underwriters, particularly the office sector, due to record low occupancy rates, high interest rates and looming maturity dates, which have led to increased loan losses for banks. With interest rate cuts likely on the near horizon, there will be a focus on the impact on net interest margins.
• Regulation is increasing and is more complex with the number of new and proposed legislations, and scrutiny may increase further depending on the outcome of the upcoming 2024 U.S. presidential election. Underwriters remain focused on compliance with evolving regulations, including AI regulation as banks’ adoption of AI increases.
• Cyber security, fraud and vendor management risks remain top risks for banks with the use of new technologies, digital transitions and fintech partnerships. With continued pressure on growth, profitability and compliance, we expect to see more M&A activity among banks, provided the regulatory environment does not discourage consolidation.

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

---