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Banking market update – Q4 2020

D&O/E&O Insurance

Financial, Executive and Professional Risks (FINEX)

By Alison MacLaren | February 3, 2021

A series of insights diving into the current state of the Bankers Liability insurance market and issues impacting D&O/E&O insurance policies.

We are pleased to present FINEX’s Banking Market Update for Q4 2020. In this issue, we explore the current state of the bankers professional liability insurance market, identify new and emerging issues in the banking industry and discuss what impact those issues may have on D&O and E&O insurance policies.

By Q4 2020, banks, lenders and insurance carriers alike had adjusted to the new normal driven by COVID-19. Unprecedented in its scope, the virus itself, along with the market volatility that followed, had tremendous consequences for virtually all industries and all lines of coverage across the globe. It has been one of the most significant issues affecting both banks and the D&O/E&O insurance market this year and will likely continue to do so for some time.

Though the full extent of the virus’ impact on D&O/E&O insurance for banks is not known, we do know that the pandemic has added a new layer of volatility on top of an already challenged insurance market. Although provisioning has slowed, reserve levels remain elevated, and the low interest rate environment now facing the industry is cause for concern regarding profitability and potential for a successful shift to revenue generating activities. The implementation of the CARES Act has also presented novel risks, including the Paycheck Protection Program which has recently re-opened for lending. Given this environment, insurers are taking a cautious approach to the renewal process and are expected to be more invasive in their underwriting protocols than in years past. Renewals will be challenging, so beginning the process early is critical, as D&O/E&O insurers may seek increases in both premiums and retentions, while carefully managing the limits they will provide and scope of coverage they will afford.

Although COVID-19 remains topical, we have not lost sight of the fact that other new and emerging issues are also affecting the banking industry. Most noteworthy is the transition away from LIBOR and the resulting uncertainty. As the COVID-19 fallout stabilizes, carriers will shift their attention to LIBOR and the risks it presents within lending portfolios. Other timely topics addressed in this edition are the outcome of the U.S. presidential election and administration predictions, cybersecurity and digital banking, amendments to the Volcker Rule, cryptocurrency, the OCC’s recently finalized Fair Access Rule, and some updates to CARES Act-related trends. We discuss these issues in detail and identify the implications for a bank’s risk profile, as well as for their D&O/E&O insurance policies.

Banks have faced a challenging year, much of which is expected to extend into 2021. We hope this publication offers valuable insights to help you successfully navigate through these turbulent times. Should you have any questions or wish to discuss any of these issues in greater detail, please engage myself or a member of your Willis Towers Watson team.

Table of Contents

  1. 01

    Premium increased and tightened capacity expected with COVID-19 uncertainty beyond Q4

    Alison MacLaren | February 3, 2021

    BPL insurance market highlights; including a focus on cost, markets, targeted segments, capacity, coverage, and COVID-19 impact.

  2. 02

    Discontinuation of LIBOR, U.S. presidential election and cybersecurity among key issues insurers face

    Alison MacLaren | February 3, 2021

    Key concerns and recommendations for the banking industry.

  3. 03

    Continued fallout from the COVID-19 pandemic

    Alison MacLaren | February 3, 2021

    Key concerns and recommendations for the banking industry based on the potential impact from COVID-19.

  4. 04

    Questions and thoughts from underwriters for the banking industry regarding PPP and LIBOR

    Alison MacLaren | February 3, 2021

    Key questions from underwriters regarding the PPP and LIBOR transition.

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Banking market update – Q4 2020 PDF 3.1 MB

Banking Industry Leader, Willis Towers Watson

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