11 February 2025
Financial Institutions Market Update 2025
The financial institutions insurance market remained buoyant for policyholders during 2024, despite several well-publicised global and national economic headwinds.
A reasonably benign claims environment and the fact that premium rates have yet to match those of 2019 (the previous low point in premium) lead us to believe that 2025 will see a continuation of these conditions.
Buyers of Financial Institution Professional Lines Insurance Should Expect:
- Rate reductions averaging -10% across the year. We expect debate regarding price adequacy from insurers, but consistently high levels of competition will stymie this.
- Increased choice of insurers at renewal across both primary and excess carriers.
- Options to increase limits of indemnity or lower self-insured retentions on a premium-neutral basis for loss-free assureds.
- Policy wordings will continue to evolve in assureds’ favour:
- Positive coverage in respect of digital asset exposures.
- Automatic and favourable run-off.
- Continued evolution of regulatory cover.
- Narrowing of certain exclusions.
- Enhanced crime coverage to respond to new and emerging digital threats.
- Improved solutions for global programmes and local insurance policies, with a greater choice of insurers available for all but the most geographically diverse programmes.
If the insurance market is consistent in any regard, it is that it will remain cyclical. Thus, the crucial question is: how long will this cycle last? Previous experience suggests that the insurance market could continue this trajectory for some time—except, of course, in the event of a market-moving, probably systemic event, which by its very nature is unpredictable.
For this reason, we anticipate an upsurgence in both interest in and insurer offerings of longer or multiyear policy periods. The benefit to both parties is improved premium certainty, plus a chance to reduce renewal administration.
If the insurance market is consistent in any regard, it is that it will remain cyclical.
Thus, the crucial question is: how long will this cycle last?
Territory Analysis
United Kingdom
Expected Rate Reduction: -12.5%
- Insurers continue to take more views on previously ‘harder to place’ types of risk, for example, private equity or those exposed to digital assets; thus, beyond benchmark reductions could be available.
- ‘Sideways’ coverage, for example, additional limits of liability or reinstatements, will become more commercially attractive.
- Insurers will take less account of recently paid claims or material notifications in their renewal terms.
- Claims emanating from UK car finance are nascent but, in any event, sufficiently ring-fenced to not trouble overall premium rate.
United States
Expected Rate Reduction: -5.0%
- There is an ever-increasing appetite for US FI risks in the London market, as premium rates are decreasing; insurers are more open to writing more of the challenging accounts.
- Insurers are more open to broker-drafted policy wordings, specific for banks and asset managers.
- There will be a greater focus on including cyber coverages into FI policies.
- EPL is often difficult to place in London, amid the uptick in claims frequency, but insurers are increasingly offering this coverage to remain competitive with the US domestic market.Claims emanating from UK car finance are nascent but, in any event, sufficiently ring-fenced to not trouble overall premium rate.
Middle East & Africa
Expected Rate Reduction: -12.5%
- While strong competition continues to exert downward pressure on premiums, reinsurers are currently steadfast in maintaining their positions on deductibles and coverage terms. We anticipate some flexibility as the year advances.
- London continues to assert its dominance as the premier market for handling larger risks and complex, multilayered placements, offering unparalleled expertise and capacity.
- London reinsurers are demonstrating a willingness to provide increased limit options, strategically aiming to sustain premium levels while accommodating client needs.
Australia
Expected Rate Reduction: -7.5%
- London insurers continue to hold a positive perspective on Australian risks.
- The availability of capacity remains substantial, fostering competitive dynamics within this region.
- Premium reductions persist as a notable trend, contingent upon the absence of significant decreases in prior renewal cycles.
- Coverage remains a primary focus for London insurers, with continuous improvements in policy wording being offered.
Latin America
Expected Rate Reduction:
- D&O: -7.5% to -15.0%
- FIPI: Flat to -5.0%
- Crime/BBB: Flat to -10.0%
The financial lines market in London is experiencing a shift as more insurers broaden their traditional appetite, exploring growth opportunities in diverse geographical areas, different client sizes, and emerging sectors or risk profiles.
- The influx of additional capacity, primarily from new MGAs, has intensified market competition, keeping pressure on pricing.
- As a result, rates for both primary and excess layers continue to decline. Insurers are also increasingly focusing on delivering exceptional service and offering tailored, blended solutions, where needed, to differentiate themselves and capture more premium opportunities.
- Clients still have the leverage to negotiate better policy terms and conditions during renewals, as restrictions in coverage have seen minimal adjustments. However, future claims trends and evolving threats could potentially influence market dynamics and available coverage solutions.
- Clients with higher risk profiles or those with a history of claims may find it more challenging to secure substantial premium discounts.
Summary
Although the financial lines market remains competitive, there is growing anticipation of its stabilisation. The rate of decline may decelerate over the course of next year. This has encouraged clients to secure favourable rates for extended periods, beyond the typical 12-month term.
In summary, the financial institutions market is expected to remain a robust buyer’s market, where commercially attractive placements are the standard.
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Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 119013.