Prior to the financial crisis that crippled the economy in 2008, many insurers of community banks were routinely offering multi-year policies for management liability and financial institution bond insurance coverage. During this time, the healthy economy helped banks of all sizes post stellar earnings and provided relative stability in the insurance market for purchasing these lines of coverage.
When the economy started to falter and banks began to deteriorate, the insurance market shifted. According to the FDIC, a total of 518 banks have failed since the beginning of 2008. The same insurance carriers that were offering multi-year policies held the bill for the failed financial institutions. The FDIC, depositors, former employees, shareholders, regulators and other stakeholders started looking toward the insurance carriers for restitution. The insurance market for the directors and officers of community banks hardened: terms and conditions became more restrictive, premiums and retentions rose, and even the healthiest institutions were not able to obtain multi-year policies.
Fast forward to 2016. The economy is recovering and the banking and insurance markets have stabilized again. Carriers have started to offer multi-year policies again, but on a more selective basis.
Deciding if multi-year policies make sense for a bank requires careful consideration of all the above points. Insurance buyers will see the value in truly guaranteed-rates as well as multi-year policies that are non-cancelable providing many benefits over traditional annual policies.
As a specialty broker, AmWINS can help navigate the benefits and challenges of multi-year policies. Our professional lines brokers have access to a variety of proprietary tools and resources to assist with marketing, negotiating coverage and providing the best insurance solutions in addition to claim advocacy. Add that to our unmatched market access and superior customer service, and we are well prepared to serve the needs of retail agents and their clients.
This article was authored by Joe Catalano, a professional lines broker with AmWINS Brokerage of Illinois.
Legal Disclaimer. Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.
(c) 2017 AmWINS Group, Inc.