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Survey Report

Insurance Marketplace Realities 2021 – Financial institutions (FINEX)

Financial, executive & professional risks (FINEX)

Financial, Executive and Professional Risks (FINEX)

November 18, 2020

The financial lines market for financial institutions (FIs) has hardened and we expect rate increases for H1 2021.

Rate predictions

Rate predictions: Financial Institutions (FINEX)
  Trend Range
D&O — Publicly traded financial institutions Increase (pink triangle pointing upward) +15% to +30%
Side-A/DIC Increase (pink triangle pointing upward) +10% to +30%
D&O — Private financial institutions Increase (pink triangle pointing upward) +10% to +15%
D&O/E&O – Asset managers (excluding private equity/general partnership liability) Increase (pink triangle pointing upward) Large market: +10% to +15%
Middle market: +5% to +10%
Bankers professional liability (BPL) Increase (pink triangle pointing upward) Large market: +12.5% to +30%
Middle market: +10% to +25%
Insurance company professional liability (ICPL) Increase (pink triangle pointing upward) Life: +5% to +20%
P&C: +10% to +30%

Note: For employment practices liability (EPL), fiduciary liability and fidelity (crime), please see dedicated sections elsewhere in this report.

Key takeaway

The financial lines market for financial institutions (FIs) has hardened, and we expect rate increases for H1 2021 to be in line with those we are seeing in Q3 – Q4 2020. We anticipate that rate increases will slowly taper in H2 2021 given the compounding effect on premiums increases.

Overall, double-digit increases have become the norm across E&O and D&O.

  • FI insurers have demonstrated strong pricing discipline in primary and excess layers, with significant attention on right-sizing excess increased limit factors (ILFs). We anticipate another quarter of ILF corrections.
  • Most programs can find adequate capacity, though some insurers have been reducing limits and ventilating capacity in certain areas and are more closely managing overall aggregation.
  • Replacement capacity is often not available at a competitive premium, but marketing programs is still recommended to achieve the best possible results. Overall, insurers are not actively focused on new business growth, making it more challenging to find replacement capacity.
  • Bermuda markets continue to offer solutions at certain premiums, retentions and attachments, while U.K. markets have become more conservative in deploying capacity for U.S. risks.
  • COVID-19 has accelerated the hard market, with the greatest impact on E&O and EPL.
  • We have started to see some tightening in coverage, as well as clarification of coverage relating to silent cyber, but this trend is limited to select insurers for now.
  • We are slowly seeing signs of new capacity coming into the market now that rates and retentions have seen material corrections and risks are seen as more profitable and sustainable.

The FI D&O marketplace continues to see lower percentage increases compared to the commercial D&O marketplace, but nonetheless, rate trends have been on the rise. (As we’ve noted in prior editions, lower rate increases are due to FI D&O rates not coming down as much in the soft market as commercial D&O rates.)

  • For public D&O, we have seen steady double-digit increases, with an average of 18%. Private D&O rate trends continue to be more favorable, with an average rate increase of 12%.
  • Side A pricing has softened over the years and, in response to derivative claims and increased litigation costs, insurers are now seeking to strengthen Side A pricing. Average increases are 19%.
  • Excess insurers are focused on right-sizing ILFs, often resulting in higher rate increases on excess layers than primary. Particular attention has been paid to lower ILFs (less than 70%) and inverted ILFs (decreasing with attachment).
  • There has been more pressure on D&O retentions, with insurers insisting that retentions have not kept pace with risk growth. As a result, we often see no meaningful premium credit for retention increases.

The professional liability (E&O) marketplace varies by subsector.

  • Asset managers: Asset managers continue to be viewed favorably. The market remains stable as an abundance of capacity keeps rates competitive. Minimum retentions have moved toward $250K. Middle market asset management is a targeted growth area for underwriters. Larger advisors and funds are experiencing more upward rate pressure.
  • Insurance companies: The market for insurance companies has hardened materially since the outset of COVID-19. Very few carriers will consider writing primary, and the lack of competition has led to increased pressure on retentions, premiums and coverage. Several primary insurers are reducing capacity from $10 million to $5 million. P&C insurers face uncertainty regarding the outcome of pending cases alleging mishandling of business interruption claims arising from COVID-19. Carriers are looking to add exclusions to P&C insurer renewals for the handling of COVID-19 related claims under future policy periods. Life insurers have been subject to greater scrutiny toward their investment portfolios, while issues like “cost of insurance” remain a significant concern. Sales and marketing coverage for life insurers is increasingly difficult to obtain, with many markets affording only sublimits, higher split retentions or excluding altogether.
  • Banks: BPL primary capacity continues to be limited, with some insurers becoming more conservative in appetite and putting more pressure on retentions and pricing. BPL insurers often require supporting lines. COVID-19 has sharpened underwriting focus on the Paycheck Protection Program, provisioning and credit risk, loan forbearances, credit reporting and liquidity risk. Additional scrutiny is also expected as the LIBOR sunset draws closer.

Several emerging coverage trends bear watching.

  • Silent cyber risk: More insurers are adding cyber and privacy exclusions on non-cyber insurance lines (e.g., E&O, fidelity, EPL) to clarify coverage. As insurers continue to assess their silent cyber exposures, we recommend reviewing the new exclusions alongside cyber policies to ensure that coverage is being addressed appropriately.
  • Extended reporting periods (ERP): Some insurers are considering removal of ERP options and increased rate factors. There are strategies that can be deployed to mitigate this trend.
  • Excess shareholder derivative demand investigation (SDDI) coverage: Some insurers are looking to reduce or remove excess drop-down sublimits due to increased losses. We have successfully maintained meaningful excess SDDI sublimits by securing drop-down sublimits higher up through the tower.
  • Cost of corrections coverage: Some insurers have tried to limit coverage to only liquid asset classes. This can be mitigated with early negotiations on wording, and if needed, increased retentions.

Smart buyers are using analytics to help navigate the hard market.

  • As rate and retention pressures continue and FIs are faced with strict expense management initiatives, buyers are employing various analytical tools to help evaluate program structures with various limits and retentions, blending of coverages and risk scenarios.
  • Analytics help quantify risks and optimize premium spend.
  • New analytical tools for financial lines coverages offer more tailored claim scenarios, further supporting strategic decisions.


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 subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

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