Financial R&R: Financial Institutions Mid-Year Review - Risk & Renewal Strategy
By Alliant Specialty / July 15, 2025
The first half of 2025 marked a shift in the financial institutions' risk landscape, driven by regulatory rollbacks, growing digital asset exposures and a surge in claims activity. Join Ron Borys and Ryan Farnsworth, Alliant Financial Institutions, as they discuss how these changes are influencing market behavior, insurer appetite and underwriting strategy. They also outline key considerations for renewals and explain how Alliant supports clients with strategic planning, analytics and claims advocacy in a rapidly evolving environment.
Intro (00:01):
Welcome to Financial R&R, a show dedicated to financial insurance and risk management solutions and trends shaping the market today. Here are your hosts, Ron Borys and Ryan Farnsworth.
Ron Borys (00:13):
Welcome, everyone. I'm Ron Borys. I'm here with Ryan Farnsworth, and this is the Financial R&R. Ryan and I thought it'd be a great opportunity now, we're halfway through 2025, to share with our listeners an update on what we're seeing through the first half of the year. Certainly the new administration has taken full swing. We know that there was a lot of anticipated changes with regards to the regulatory oversight and a variety of other things that influence the way in which financial institutions think. Certainly tariffs, right? We had them one day. They got paused the next day. A lot of movement in the market and certainly all things that our underwriters and clients are certainly keeping close tabs on. Ryan, how does that sound to you?
Ryan Farnsworth (00:53):
It's been a crazy six months. It's hard to believe that it's already been six months in 2025, but the way that the world and the global economy is working, it's impacting not just the insurance industry, but the financial institutions industry. Given how our primary focus is to help our clients find that more rewarding way to manage risk, focusing on risk is the place to start. As we think about the, you mentioned it, the shifting regulatory environment because for so many years during the good majority of our careers, Ron, the regulatory risk has been front of mind for financial institutions. As many private equity funds, hedge funds, other alternative asset managers have become registered with the SEC and work with so many other regulatory bodies and governmental bodies, that regulatory risk is constantly on their mind as well.
What the government and what the regulators have told us during the first six months, by doing a variety of actions like repealing or withdrawing certain rules that had been proposed in the last 24 to 48 months, have now freed up the risks associated with regulatory oversight and made it a little bit less of a concern from an underwriting perspective. I think when post Sarbanes-Oxley and post financial crisis, when that regulatory risk was still prevalent, it gave a lot of underwriters comfort that there was now at least a governing body or regulatory body that in a sense was pre-underwriting the risks. Firms were forced to establish a culture of compliance, if you remember that tagline from 10 plus years ago, to have a culture of compliance embedded within their financial institutions operations, so that they could operate a business and ensure that the government, as they were thinking about investors and other stakeholders and ensuring that their interests were protected, we could then navigate that risk and understand it was always going to be part of the calculus for these financial institutions. Now we don't know what it's going to look like a year from now, two years from now, three years from now, but we do know that firms are going to be able to focus a little bit more on other aspects of their risk continuum as opposed to just primarily focusing on regulatory risk.
Ron Borys (03:03):
Yes, and what's interesting is that typically underwriters get spooked by uncertainty. It’s a pretty safe thing to say that the fate of some regulatory agencies, I know the CFPB was definitely one that was singled out and targeted by the administration. I think at one point they even ripped the sign off the building to show that they are not in belief of the need for that particular oversight group of regulators. But I haven't seen it really impact underwriters’ appetite. If anything, underwriters are embracing this new environment. There seems to be a very healthy appetite for risk. There's certainly certain industries that carriers are a little bit more conservative when it comes to, but even when it comes to cryptocurrency, you're definitely starting to see that market open up quite a bit. Markets are willing to be more what we'll call opportunistic. The only thing that is still a big problem is for firms that are actually mining the securities. And certainly when you overlay regulatory cyber and E&O risks, I think that's probably one of the concerns there. But all in all, I would say with the exception of, call it the earlier part of the year where we had two markets essentially exit the financial lines space, not specifically financial institutions, but financial lines in general. Outside of that, I would say we have a very healthy, robust marketplace, and the results are certainly indicative of that as our clients continue to see broadened coverage and better savings when it comes to premium results.
Ryan Farnsworth (04:24):
Yes, the marketplace and the capacity component of the financial institutions insurance marketplace is still extremely robust. There are still a lot of underwriters and claims professionals on the underwriting side, on the insurance company side, who know how to effectively run a business. But the depressed pricing environment and the reality is, and we'll get to this last aspect of our update, which is pertains to claims. That hasn't slowed down at all. It's been a big part of the insurance business for so many years, but as premiums have gone down, claims have gone up and continue to go up. You mentioned the regulatory component of the digital asset community. That's going to be really interesting to watch over the next couple of years because that's one aspect of the regulatory environment that will likely change. I almost feel like cryptocurrency and other digital asset firms right now are like the hedge funds of 25 years ago trying to get insurance in an unregulated environment. Once they become regulated and the administration and the government opens their doors, if you will, to oversee those firms, it's going to help the procurement of insurance, not especially exclusive of directors and officers, liability, cyber, but all aspects of their business. That will only benefit those firms as they grow and can manage their risk by transferring some of it to the insurance marketplace, but that will lead to more claims. That will lead to claims that we haven't seen before and that haven't been covered by insurance before. That's probably one of the more interesting components of this update is that our claims team is as good as they've ever been, but as busy as they've ever been. That's something that as we turn into the second half of 2025, that's not going to change.
Ron Borys (06:07):
I couldn't agree with you more. With the inventory of claims that have been out there, one of the challenges that we've had is for every time you notice a claim, the carrier has an obligation to respond to that. Obviously first in the form of an acknowledgement, but then certainly with some type of position. I find that the volume of letters that are coming out, there's definitely some not great written letters that we've had to go back and talk to some of our partners about because people are just in a rush to get through the inventory of claims. As we've talked in the past when Steve was on with us, communication, cooperation and consent are three really important aspects of making sure that you avoid some of the inherent pitfalls that exist in the insurance claims process. The collaboration between our brokers and our claims team has really allowed our clients to really see what that's all about. For the underwriters that we have really strong relationships with, they seem to be receptive. They're not unfairly or unnecessarily penalizing clients just because they're noticing matters. I think everybody realizes that as a large firm, particularly a large financial institutions firm, you're going to see situations that come up that are going to trigger the obligation to report under the policy. I would say a lot of our clients have done a really, really good job working with us and working with our underwriters to really mitigate the impact of those claims. At the end of the day, the more trust and the more reliability that we can establish between our clients and our carrier partners, it's really going to help a ton because again, you can't avoid the claims. The claims are going to happen. Obviously we've seen a pretty big uptick over recent years in employment practices litigation, which has certainly been a challenge, both from a frequency and a severity perspective. Outside of that and the occasional one-off rare situations that happen, I can't necessarily point a finger at any trends that we've seen over the first six months of this year.
Ryan Farnsworth (07:56):
Steve Shappell and our claims team can't stay away from the Financial R&R when it comes to getting updates on the market because they're inextricably tied right now to how the market is performing and how it's going to perform in the coming years. I believe it was the ICI claims report that came out earlier this year where they align where these claims are coming from. The biggest piece of the pie was miscellaneous because it just seems as though, although we can try to categorize where claims are impacting financial institutions around regulatory, investor and stakeholder, shareholder claims, cost of corrections for those firms that have that type of operations, the customary things that we've been used to seeing for the last 10 to 15, 20 years in the financial institution sector, there seems like an exorbitant amount of other stuff that's popping up and is putting pressure on the policy to perform. As we as brokers and as our insurance company trading partners think about it, we have to have client policy holder first and foremost when we think about their experience with the insurance claims process. We pride ourselves on ensuring that our policies are in a position to perform, but we also, as part of that negotiation process at each renewal, no one understands that the black and white policy is what's going to prevail in the event of a claim. It's super important for us to partner with our clients and with insurance companies that are going to understand that and understand that our market is only going to succeed if we communicate and ensure that our policy holders and our clients have the best possible experience when it comes to how a claim performs.
Ron Borys (09:33):
Yes, I couldn't agree with you more. I guess as we look to wrap up this episode of the Financial R&R, we're halfway through the year, we've obviously got another six months left to go. What do you think are two or three things that our listeners should be thinking about as they're approaching these renewals and thinking about how the market and risk environment might change or evolve between now and the end of the year?
Ryan Farnsworth (09:56):
If I'm sitting here and I have an insurance renewal in the next six to nine months, I want to have a conversation with my broker now about how we're going to strategize for the upcoming renewal. Knowing that claims are hitting our clients at such a breakneck pace, it's only a matter of time before I have a claim myself. As brokers, we need to be proactive as possible with our clients to understand where those trends are coming from and review the policy, identify priorities for how a client wants to approach a renewal. Is it going to be cost? Is it going to be coverage? Is it going to be a retention structure? If you ask our clients all three, of course, but what do we prioritize in our negotiations? As we communicate on those prioritizations, we'll be able to execute because the market is in a favorable place right now. If there are any issues with capacity on an insurance program where an insurance carrier may have some questions about the risk or about the industry, let's have those conversations early. Steve Shappell always uses this when it comes to a claims process, we should be having those communications early and often. There's no reason why that shouldn't be the case as we approach the last six months of this year. As I'm thinking about the pricing environment especially, I'm going to try to take as much savings out of my premium and out of my cost as I possibly can, knowing that the risks are still there, that the claims are still there, but I want to make sure that my individuals, my directors and officers are protected and that I have the right limit. Engaging in resources, whether it's through our loss modeling tools or peer benchmarking or other analytics, the most important thing we can think about is how we work through those situations with our clients together.
Ron Borys (11:37):
Thanks, Ryan. I think this is a great opportunity for us to share our views and thoughts and observations over the first six months of the year. I can promise our listeners that you and I will certainly be a lot more active on the Financial R&R over the last six months of the year. I know we had two IPOs that we worked on recently, so it's nice to see IPOs coming back in the mix and certainly have some guests slated for that. But in the interim, until we talk again, thanks everybody for listening. We appreciate the time, and if you have any questions or looking for additional information on Alliant, you can visit our website at www.Alliant.com. If not, we'll wrap up this session of the Financial R&R, and we'll talk to you all again real soon.
Alliant note and disclaimer: This document is designed to provide general information and guidance. Please note that prior to implementation your legal counsel should review all details or policy information. Alliant Insurance Services does not provide legal advice or legal opinions. If a legal opinion is needed, please seek the services of your own legal advisor or ask Alliant Insurance Services for a referral. This document is provided on an “as is” basis without any warranty of any kind. Alliant Insurance Services disclaims any liability for any loss or damage from reliance on this document.
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