Bank Insurance Market Update

In July I posted about changes taking place in renewal insurance premiums. That was not specific to banks and it centered around property and auto insurance.

With a few more months behind us, I can say that premiums are definitely going up for bank management liability and fraud-bond insurance.

Until August I was seeing insurers increase premiums by about 25%-50% of asset growth on three-year renewals. Meaning, if a bank’s assets grew by 8% in three years I was seeing premiums increase by 2% to 4% at renewal.

September renewals bumped that average to about 50% of asset growth.  October and November were 50% to 75%. Policies, where losses had been paid, showed increases in the premium of 100% (and more) of asset growth. Same for banks with regulatory issues.

Recall that if your premium is going up by less than your asset growth then rates are still going down from prior years. (I admit that this is a simplistic approach.  However, it is a metric that seems to hold water.)

To put this in some perspective, most banks still are well below what they paid for coverage ten years ago when you consider your asset growth. One client I recently looked at has doubled its assets in the past ten years. Their premium is up only 48% in that period. That means their rate is lower now than it was ten years ago.

What does this mean for your future?

If your bank insurance is renewing in 2020 and you have had no losses, budget for an increase in your bond and management liability premium of the larger of 10% or your asset growth.  So, if your assets have grown by 18% figure your premium is going up by 18%. If your assets have grown by 8%, anticipate an increase of 10%.

If you have had losses or are having regulatory trouble budget a doubling of the above.

Banks with no claims and without regulatory issues might be able to buck this trend by bringing in other insurers.  Not always, but often.

My recommended approach for almost all clients is that you reach out to your current insurer five months before renewal. Ask that they provide renewal indications sixty days before your renewal. Tell your agent to tell the insurer that you will not seek proposals from other insurers if they are aggressive with the renewal.  To me, that means keeping your premium increase below your asset growth.

I almost always want my clients to build a strong relationship with their insurer. That said, we can not hand insurers the keys to the kingdom. Allowing insurers to quote renewals at the eleventh hour means that you run out of time to seek options.

Of course, there are times to bring in new insurers. The trick is to figure out when that is for your bank. Experience is key in reading the tea-leaves. Glad to help if I can. Give me a call.