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Stress and Opportunity
The first quarter of 2025 has been a whirlwind. New presidential administration. Historic wildfires. Financial market volatility. Trade war and tariff talks. A looming recession. Higher costs at the grocery store. Higher car repair bills. Higher cost of wood products including paper (this is a big one for Insurance Journal) Oh my. And yet through it all the insurance industry seems to be doing remarkably well. Many of the largest property and casualty insurers have set record incomes for 2024. But overall, I think it’s safe to say that stress is part of the picture for the industry and the clients it insures.
According to a recently released study by Sentry Insurance, more than two-thirds of polled executives reported feeling more stressed at the beginning of 2025 than they did at the start of 2024.
The survey, conducted by Wakefield Research on behalf of Sentry, found stress levels elevated in 67% of participants. At the same time, 74% of executives said they were not completely confident that their company’s current insurance coverage is adequate.
“Our research highlighted a recurring theme: managing risk is a big part of managing stress,” said David Dickinson, customer research director at Sentry. “Executives are experiencing worsening external challenges and putting strategies in place to protect the future of their businesses. This year, many are increasing safety measures, reassessing their insurance, and making adjustments to navigate external pressures.”
Wakefield Research polled 1,000 owners and C-suite leaders of U.S. companies for Sentry’s 2025 C-Suite Stress Index.
Nearly half (47%) of business leaders reported optimism that their companies will thrive this year. Of those optimists, 63% described the stress they face heading into 2025 as higher compared to this time last year.
Economic uncertainty (47%), supply chain challenges (44%), the cost of employee health care (41%), labor shortages (38%), and inflation (36%) ranked as the top five concerns among the survey participants.
In addition to economic and labor factors, 72% of surveyed execs expressed concerns about rising litigation and multi-million-dollar verdicts in their industry. Ninety percent said their business has been affected by severe weather in the past five years, with nearly two-thirds (63%) experiencing outages that left company, customer, or vendor systems temporarily inoperable.
‘Executives are experiencing worsening external challenges and putting strategies in place to protect the future of their businesses.’
Specifically on the insurance front, Sentry found that nearly all executives (97%) plan to re-evaluate their insurance policies this year.
Could this be an opportunity for agents and brokers to shine?
Yes, said Sentry, as some 43% of the respondents indicated they will re-evaluate their policies with an eye to adding insurance coverage to lower risks. Some 38% are looking to shore up areas where they are not currently covered but know they should be. What are you doing to respond to your clients’ worries and stress today? What more could you do?
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The Secret Sauce: 3 Key Ingredients to Crafting Your Client’s Story of Risk
By Rami Levine, Director of Underwriting, AIU
As we approach the second quarter of 2025, the commercial property insurance market shows signs of softening — but not to the extent we have seen in previous cycles. Tighter market conditions are now a longterm reality across most property types including hospitality and frame habitational.
Last year, favorable underwriting results added stability and increased competition, especially in non-catastrophe-prone areas. However, insurance carriers continue to reassess their capacity and risk tolerance. While some insurers have already withdrawn from high-risk areas in California and Florida, those that remain are introducing new, more restrictive programs. Not every insurer or program will fit your client’s risk profile. That’s where your expertise as an agent becomes invaluable. Your ability to match the right programs to the right businesses requires an understanding of how to tell your client’s story of risk.
Effectively Position Your Client’s Risk in 3 Steps
1. Prepare all the ingredients you need. Sharing comprehensive details from the start makes it quicker for underwriting teams to review your submission and to determine if it’s a good fit. When preparing your submission, double-check you are including the following details:
• A cover note providing a quick and precise synopsis of risk
• Complete loss history inclusive of detailed claims information
• Clear target premium and deductible expectations
With these components laid out, underwriters can quickly provide indications and follow up with quotes soon after. For example, instead of simply stating that a property is being non-renewed, illustrate the full story: “This account is being non-renewed by Carrier X due to changing guidelines but has a clean five-year loss history and a target premium of $X.” This level of detail helps underwriters quickly determine competitiveness and leads to a streamlined process.
2. Get to know our appetite.
Understanding your insurer’s appetite for risk
— or the specific risks they prefer to write — saves everyone time and increases your chances of successfully placing business. When you take the time to learn which risks a particular program will cover, you dramatically increase your chances of binding coverage.
At AIU, our appetite is well-defined and focused on the three “H” industries: habitational, hospitality and healthcare. Within these sectors, specific guidelines correspond to location, loss history, and property maintenance standards. When agents familiarize themselves with these parameters, it significantly boosts the likelihood of success.
Stay in touch with insurers to better understand their appetite. Don’t be afraid to send a quick email asking, “I have a healthcare facility in this location—is that something you would consider?” or “Would this coastal property be an issue for your program?”
• Loss history, including past claims and steps taken to mitigate future risk
• Daily management practices, especially for seasonal or high-turnover properties
• Maintenance schedules and completed improvements
• Vacancy rates and tenant profiles, such as Section 8 or student housing
• Any previous non-renewals and the reasons behind them
The AIU team prides itself on quick responses and clear guidance. If you’re unsure whether a risk fits our appetite, just ask. If it doesn’t match, we’ll let you know quickly so you can explore other options. The key is keeping those communication channels open and active.
3. No mystery ingredients necessary.
Is there something in your client’s risk profile you are hesitant to disclose? Chances are your underwriter will find it anyway. Underwriters today have numerous tools to verify information, ranging from online search engines and artificial intelligence to property inspections and public records.
Omitting essential details about a property’s loss history, management practices, or tenant profile won’t remain hidden for long, but will erode trust and rapport.
Instead, be forthcoming and transparent about:
When you share the complete story upfront, you establish credibility and set the table for a more productive underwriting process — and a much stronger long-term partnership.
The recipe for a successful partnership
The renewal process is always another hurdle for agents and insureds, but with AIU, renewals are remarkably simple. AIU internally vets all program locations pre-renewal. Once a location is deemed eligible to renew, AIU does not require a full submission. Simplicity is a significant goal for us and those we partner with.
In today’s challenging market, finding the right partner for each client’s risk requires skill and knowledge. By providing complete information, understanding insurer appetites and maintaining transparency, you can position yourself as a valuable partner — both to your clients and the carriers you work with — in 2025
News & Markets
Liberty Mutual to Sunset Safeco Brand in 2026
By Chad Hemenway
Safeco Insurance will stop being a brand name in 2026, and Liberty Mutual Insurance will sell all of its personal lines products under the Liberty Mutual name.
Safeco has been Liberty Mutual’s brand for the independent agent channel to sell home, auto, and specialty business since Safeco was acquired by the Boston-based insurer in 2008.
“The Safeco legacy is one of strength, partnership, and an unwavering commitment to independent agents,” said Luke Bills, president of independent agent distribution, in a statement. “We will carry that legacy forward and will bring our agents even greater value with this brand change.”
But come 2026, the Safeco logo in agency offices—the same one that once adorned a Major League Baseball ballpark—will be replaced with Limu Emu and Doug. Novelties commemorating Safeco’s 100year anniversary in 2023 (born in Seattle by Hawthorne K. Dent as General Insurance Company of America) will be stored away.
Liberty Mutual, the sixth-largest writer of personal lines in the U.S., said the policies of Safeco customers will not be impacted and customers will keep their agent relationship. Liberty Mutual also uses direct distribution and licensed sales reps.
Transitioning away from the Safeco name will “fully harness the Liberty Mutual brand value for all of our customers, agents, and partners, across all distribution channels,” added Tyler Asher, Liberty Mutual chief distribution and marketing officer, US Retail Markets. Liberty Mutual said direct and independent agent channels will remain differentiated.
The Safeco brand will be retired in 2026.
“Importantly, this will significantly simplify our business, allow us to dedicate our considerable marketing power behind a single brand, and enable us to leverage and scale our technology to deliver unified but differentiated products and experiences across channels,” Asher added.
Since it was bought by Liberty Mutual, Safeco’s 22,000 or so independent agencies helped grow the business to $13 billion in annual premium, as the company sometimes stepped in to assume books of business from other insurers. It did so late last year, taking on the personal lines book of Main Street America. In September 2024, Safeco said it entered into a personal auto and umbrella lines book transfer agreement with Columbia Insurance Group.
Resilience: Third-Party Risk Involved in 31% of Cyber Claims
More merger-and-acquisition activity and technology consolidation have given cyber hackers plenty of entry points to exploit, making third-party cyber risk a dominant driver of claims for Resilience in 2024.
New research from the San Franciscobased cyber solutions company found 31% of claims it handled in 2024 dealt with third-party risk, including ransomware and outages affecting vendors.
“Third-party risk isn’t only making headlines—it’s driving unprecedented losses. While this risk is often invisible until it’s too late, it’s now clear that the industry has reached a tipping point,” said Vishaal “V8” Hariprasad, co-founder and CEO of Resilience.
“Businesses can no longer afford to consider their partners’ vulnerabilities as siloed from their own,” he said. “By understanding this new reality of shared risk, enterprises can make smarter
business decisions and meaningfully mitigate material loss.”
Third-party risk led to claims with incurred losses for the first time ever. Resilience said these claims made up 23% of incurred claims in 2024, compared to none in 2023.
Recent incidents such as Change Healthcare, CDK, and PowerSchool have highlighted how cyber hackers exploit single points of failure.
Ransomware kept its position as the top cause of loss in 2024. More than 60% of Resilience claims were related to ransomware.
The cyber insurer also flagged transfer fraud as rising in popularity. Claims involved transfer fraud made up 18% of incurred claims in 2024.
News & Markets
ZestyAI: More Than $2 Trillion in US Homes at High Risk of Wildfires
While Western wildfires have dominated disaster news for decades, new analysis using artificial intelligence shows millions of homes across the country—even in the swampy Southeast—are at risk for wildfires.
ZestyAI found that $2.15 trillion worth of U.S. residential property is at high risk of wildfire damage. The study assessed 126 million properties nationwide and revealed that 4.3 million individual homes face heightened wildfire risk.
“Wildfires are threatening more properties than ever before, with billions of dollars in exposure even in areas many people don’t associate with fire risk,” said Attila Toth, founder and CEO of ZestyAI.
The study used AI models trained on over 2,000 past wildfires and mapped exposure at the property level, integrating satellite and aerial imagery, topography, and structure-spe-
cific characteristics. The report found growing development abutting wildlands and intensifying climate conditions are driving higher wildfire risk in states like North Carolina (4.6% of homes at high risk), Kentucky (2.9%), Tennessee (2.3%), and even South Dakota (11.0%).
Unsurprisingly, California has the highest total exposure for wildfire damage, with over 1.54 million homes at risk and $1.21 trillion in total exposure. California was followed by Colorado, Texas, Utah,
and Arizona.
Because many areas are not historically prone to wildfires, homeowners may be unaware of risks and underinsured, Toth said. One in eight U.S. homeowners already lacks adequate insurance coverage.
On the other hand, Toth said, “Insurers have traditionally relied on broad, regional models that don’t account for individual property characteristics. That means some homeowners are denied coverage even when their true risk is much lower than their neighbors.”
Toth said that AI-driven risk analytics can mean more accurate and efficient assessments of wildfire exposure. Granular, property-specific insights can help insurers make smarter underwriting decisions—keeping coverage available in high-risk areas while ensuring that homeowners who take mitigation steps are recognized.
US Commercial Lines Prices Up 5.6% With Signs of Moderation: WTW Pricing Survey Reveals
U.S. commercial insurance rates showed a continued upward trend, with signs of moderation in the fourth quarter of 2024, according to the latest findings from WTW’s Commercial Lines Insurance Pricing Survey (CLIPS).
Carriers reported an aggregate price increase of 5.6% in the fourth quarter— down from the 6.1% rate recorded in the third quarter of 2024. WTW said in a
press release that specific coverage lines experienced “significant changes.”
“The fourth-quarter data shows a continued upward trend in overall pricing, with signs of moderation compared to prior quarters,” said Yi Jing, senior director of insurance consulting and technology at WTW. “Lines such as commercial auto and excess/umbrella liability continue to see notable price increases, while the commercial property market experienced a significant slowdown in pricing adjustments. These trends underscore key shifts within the commercial insurance landscape.”
Forty-one insurers representing approximately 20% of the U.S. commercial insurance market (excluding state workers compensation funds) participated in the survey.
Excess and umbrella liability recorded its highest price increase in the past three
years, while commercial auto recorded its highest price increase in CLIPS history and continued to rise in double digits.
The press release said that commercial property experienced “the most notable shift this quarter” with a moderate price increase that was significantly lower than the prior quarter.
Rate increases for mid-market accounts continued to moderate; this extended the trend from the previous quarter. WTW reported that small accounts also saw lower price increases compared to the prior quarter. Price increases for large accounts remained virtually unchanged.
CLIPS data is based on new and renewal business figures obtained directly from carriers underwriting the business. CLIPS participants represent a cross-section of U.S. P&C insurers that includes many of the top 10 commercial lines companies and the top 25 insurance groups in the U.S.
40%
The number of mid-market business owners who report their top area of investment for risk mitigation is technology/security, followed by security/cybersecurity enhancement (24%), labor/ staffing (19%), supply chain/supplier stability (17%), and training programs (11%), according to Nationwide's Risk Management Survey 2024 Insights Report. Small-market businesses plan to invest in technology/security (24%), followed by offerings/growth (21%), costs/revenue (20%), recruitment/employee retention (17%) and supply chain/supplier stability (14%).
21,500
4%
The amount the Congressional Budget Office (CBO) projects the GDP will drop by 2100, projecting future temperature increases versus if temperatures remain unchanged after 2024. The CBO gives a 5% chance that GDP in 2100 will be at least 21% lower than it would have been in the absence of additional changes in temperature.
The number of insurance industry job vacancies each year over the next decade, according to the Bureau of Labor Statistics. If current trends continue, the rate of new hires will not keep pace with retirements and other departures. Among Gen Z workers, 77% prioritize work-life balance, while 92% emphasize the importance of mental health in the workplace. These shifting attitudes will call for new ways of approaching the talent shortage.
$2.15
Trillion
The value of U.S. residential property at high risk for wildfire damage. Data analysis from ZestyAI assessed 126 million properties nationwide and found that 4.3 million individual homes face heightened wildfire risk. Growing development abutting wild lands and intensifying climate conditions are driving higher risk in states like North Carolina (4.6% of homes at high risk), Kentucky (2.9%), Tennessee (2.3%) and South Dakota (11.0%).
Declarations
D&O Dampening
“Despite recently favorable statutory underwriting results, the softer pricing of the past couple of years could ultimately dampen the financial performance of D&O insurers because the premium base to support future claims activity has diminished, even as risks are emerging and expanding.”
— AM Best commentary warning that recent softer pricing for directors and officers coverage could begin to affect insurers’ underwriting results. Renewal premiums for monoline D&O liability continued to fall during the first three months of 2025, particularly for companies involved in initial public offerings, special purpose acquisition companies, and de-SPAC companies.
Affordable Ag Insurance
“This type of crop insurance program is unique in that it was a bipartisan effort that originated in Delaware to help protect Delaware producers and our agriculture industry. This program is based upon a farmer’s choices in their risk management strategy and helping them select the right insurance plan for protecting their revenue.”
— Delaware Secretary of Agriculture Don Clifton explaining the state’s new insurance program, which promises to reduce premiums for 2025 crop insurance plans for producers who had an eligible plan in 2024.
Rx Regulations
“The notion that big government is going to be in anybody’s medicine box is not something that I think is reflective of where most Americans are at.”
— Joe Shields, managing director of Transparency-Rx, in response to Florida insurance regulators asking companies to hand over extensive amounts of data on people’s pharmacy claims, including personal information and prescription drug usage. The unusual move is raising privacy concerns.
Cyber Con Lawsuit
“Con artists are evil and will stop at nothing to steal everything you have… We already know that they target older Iowans, but now it seems that they even hunt through obituaries to target widows. They convince these older women that they need help and then send their victims to crypto ATMs. And the crypto ATM companies take a cut of the profits. It’s not just wrong, it’s illegal. I’m fighting to get Iowans their money back and force the crypto ATM companies to make big changes.”
— Iowa Attorney General Brenna Bird commenting on recent lawsuits the state filed against Bitcoin Depot and CoinFlip, Iowa’s two largest cryptocurrency ATM operators.
Dying Bees, Higher Prices
“The beekeeping industry has been warning for almost 20 years that we’re going to pass a point of no return at some point… Bees are the backbone of agriculture. All things that make food delicious and nutritious come from honeybees.”
— Blake Shook, a Texas beekeeper who co-founded a business that supports others in the bee business, noting the impact of the high number of bee deaths over the past year. Shook said the decrease in bees could impact the price of fruits, vegetables and other foods that rely on bee pollination for growth. Texas is one of the nation’s top beekeeping states.
California Fire Fund
“We have confidence in the fund.” — Edison International CEO Pedro Pizarro speaking on the California Wildfire Fund, which allows the state’s utilities to recover some wildfire-related claims payments. The $21 billion fund has been largely untapped by investor-owned utilities like Southern California Edison and may shield Edison International’s balance sheet if equipment owned by the company’s electric utility is found to have caused a deadly Los Angeles fire in January.
Business Moves
National
Arthur J. Gallagher & Co., Woodruff Sawyer Insurance brokerage
Arthur J. Gallagher & Co. has signed a definitive agreement to acquire Woodruff Sawyer for $1.2 billion.
Andy Barrengos, chairman and CEO of San Francisco-based Woodruff Sawyer, will operate under the direction of Peter Doyle, head of Gallagher’s U.S. retail property/ casualty brokerage operations.
The deal, expected to close in the second quarter of 2025, follows Gallagher’s much larger late 2024 agreement to acquire AssuredPartners for $13.45 billion for its middle-market reach.
Woodruff Sawyer is another middle-market play, but also has larger clients. The brokage offers commercial property/ casualty products, employee benefits solutions, and risk management services from 14 U.S. offices and one U.K. office.
In 2018, Woodruff Sawyer firm celebrated 100 years in business. The firm started out in life insurance as E.L. Woodruff & Sons in 1918.
Employee-owned Woodruff Sawyer ranked 24th in Insurance Journal’s 2024 Top 100 Independent Property/Casualty Agencies, with P/C revenue of about $214.7 million. AssuredPartners ranked fifth on Insurance Journal's list.
Gallagher said Woodruff Sawyer’s reported pro forma revenues and EBITDAC (Earnings Before Interest, Taxes, Depreciation, Amortization, and Coronavirus), with expected synergies, for the trailing 12 months ended December 31,
2024 were $268 million and $88 million respectively.
Rolling Meadows, Illinois-based Gallagher said integration costs and expected non-cash management retention costs are expected to total $150 million over the next three years.
East
Alera Group, Kaplansky Insurance Agency
Needham, Massachusetts-based Kaplansky Insurance Agency has been acquired by the national financial services firm Alera Group.
This new partnership brings more than 100 agents to add to Alera Group’s property/casualty offerings in the Northeast.
The independent agency was founded in 1974 in Brookline by Ely Kaplansky at the age of 22. The agency has grown into one of the largest privately held insurance agencies in the Northeast. Over the last 50 years, Kaplansky has completed 53 acquisitions and welcomed more than 50,000 clients.
The agency has 18 locations in Massachusetts and Rhode Island. Last month, Kaplansky disclosed it recently bought two central Massachusetts insurance agencies and a third in the western part of the state.
The Alera announcement said that Kaplansky Agency employees will continue serving clients in their existing roles.
Terms of the transaction were not disclosed. MarshBerry Capital acted as financial advisor to Kaplansky in the Alera
transaction.
Illinois-headquartered Alera Group is a privately-held independent financial services firm with $1.5 billion in gross revenue and 4,500 colleagues. Alera Group was formed in 2017 by the merger of 24 independent insurance firm and backing from Genstar Capital. In 2020 Alera received $150 million from The Carlyle Group to fund acquisitions.
Selectsys, Expert Insured
Tennessee-based Selectsys, an insurtech specializing in business process outsourcing, acquired Expert Insured, an artificial intelligence-led insurance management system for wholesalers, carriers and managing general agents.
Headquartered in Boston, Expert Insured has a new CEO, Spencer McDonald, previously with McKinsey & Co.
Expert said it utilizes AI-enhanced workflows and management tools to automate processes and improve efficiency for insurance companies.
Selectsys, with offices in Knoxville, Tennessee, has been around for more than 20 years, providing business processing and tech for MGAs and wholesalers, the company said.
NSM, New Mountain Capital
New Mountain Capital, an investment firm, has agreed to buy the commercial insurance division of Pennsylvania-based NSM Insurance Group.
The firms said in a news release that the deal is expected to close in the next 45 days. Terms were not disclosed.
Based in Conshohocken, outside of Philadelphia, NSM holds a portfolio of some 15 niche insurance programs as well as a retail brokerage. It has been supported by capital from Carlyle, a global investment firm.
Geof McKernan is CEO of NSM. He and Bill McKernan, president, will join the board of directors, but Aaron Miller, chief commercial lines officer at NSM, will be CEO of the division that will be part of New Capital. Miller has more than 20 years of experience in property-casualty commercial lines.
The new NSM commercial division will continue to be marketed as NSM until a new brand name is established, the companies said.
NSM was founded in 1990 and now has some $2 billion in premium.
New Capital, based in New York, said it has about $55 million in assets under management. The firm focuses on business growth and long-term capital appreciation.
Midwest
HUB International Limited, John L. Kiley Agency, dba DAR The Rocchio Agency
HUB International Limited, headquartered in Chicago, acquired the assets of John L. Kiley Agency, Inc. dba DAR The Rocchio Agency.
Headquartered in Carmel, Indiana, The Rocchio Agency is an independent insurance agency providing commercial and personal insurance and employee benefits services. Their expertise in the residential construction, including custom home building, and real estate development industries support Hub’s Specialty practices.
David Rocchio, sole owner, and The Rocchio Agency team will join Hub Midwest East. The Rocchio Agency will be referred to as The Rocchio Agency, a Hub International company.
HUB International Limited, Lindenwood Agency, Inc.
HUB International Limited, headquartered in Chicago, acquired the assets of Lindenwood Agency Inc.
Located in St. Charles, Missouri, Lindenwood Agency is one of the largest independent insurance agencies in St. Charles and has been in business for over 50 years.
The agency provides commercial and personal insurance to businesses and individuals in the local communities of Missouri and Illinois.
Melodie Smith, president, Ryan Mica, vice president, and the Lindenwood Agency team will join HUB Kansas and Missouri.
Lindenwood Agency will be referred to as Lindenwood Agency, a Hub
International company.
Arthur J. Gallagher & Co., Dyste Williams
Arthur J. Gallagher & Co., headquartered in Rolling Meadows, Illinois, acquired Dyste Williams, a Minneapolis-based retail insurance agency specializing in commercial lines, employee benefits and personal lines services in the Upper Midwest region.
Ted Dyste, Nels Dyste, and their team will maintain their current location, operating under the Gallagher Agency Alliance division. They will report to Jen Tadin, who heads Gallagher Select, the company’s U.S. property/casualty operations for small businesses and personal insurance.
The acquisition, announced on March 3, 2025, aims to strengthen Gallagher’s small business capabilities.
Gallagher Agency Alliance specifically focuses on merging with agencies specializing in small business property/casualty insurance and employee benefits.
Financial terms of the transaction were not disclosed.
Inzone Insurance Services, Kouri & Assosicates Inc.
Inszone Insurance Services, headquartered in Rancho Cordova, California, acquired Kouri & Associates Inc., based in Sioux Falls, South Dakota.
Kouri & Associates was established in 1970 when the Kouri family entered the insurance business. By 1977, they became an independent agency, focusing on personal lines and select commercial offerings for small businesses.
Bryan Kouri led the agency since 1990. Over the decades, Kouri & Associates has evolved to serve a broad range of policies, including homeowners, auto, life, and commercial coverages.
Under the Inszone Insurance umbrella, Bryan Kouri, partner Sheldon Koski and the Kouri & Associates team will continue to serve clients from their Sioux Falls office.
South Central
Artemis Insurance,
Ozark Insurance Agency
Artemis Insurance, a full-service
insurance agency and the new parent brand of Texan Insurance, announced its partnership with Louisiana-based Ozark Insurance Agency, a provider of personal and commercial insurance solutions for six decades.
Ozark Insurance Agency was founded by Robert “Bob” Mitchell in 1971. Originally started as a real estate agency, it branched into the insurance industry later that year. Bob’s son, Gary Mitchell, joined the agency in 1978 – he and his wife Elke bought it from his father in 1999.
In May 2019, Gary and Elke made the decision to retire and sold the business to their daughter and son-in-law – Kristi and Kyle Watson.
Kyle, Kristi, and their staff continue to serve the insurance needs of South Louisiana.
The Ozark Insurance Agency team will remain in place.
Higginbotham, EZ CERT
Higginbotham, headquartered in Fort Worth, Texas, forged an association with Program Insurance Group of Georgetown, Texas — also known as the home of EZ CERT, a nationally deployed insurance certificate tracking service.
Through the association, Higginbotham will acquire EZ CERT.
EZ CERT streamlines compliance, seeking to make the process seamless for franchisees; and to ensure that franchisors stay protected.
Program Insurance Group is an independent insurance agency that offers business, nonprofit and personal insurance to a range of clients in Texas, and specialized franchise insurance to entrepreneurs across the countrye.
Southeast
FM, Velocity Specialty Insurance Co.
Velocity’s excess and surplus (E&S) carrier, Velocity Specialty Insurance Co. (VSIC), will be acquired by Rhode Island-based global commercial property insurance company FM, subject to regulatory approval.
The deal will allow FM to expand into E&S property insurance.
National
Allianz Commercial, headquartered in New York City, appointed Jenna Contreras to the North American distribution team in the newly created role of portfolio solutions leader for wholesale and managing general agents (MGA) programs. Based in Chicago, Contreras leads the wholesale and MGA/programs’ key strategic broker trading relationships across the U.S. and Canada.
Ryan Specialty, headquartered in Chicago, promoted Dawn D’Onofrio to executive vice president and global chief underwriting officer of its specialty underwriting segment, Ryan Specialty Underwriting Managers. She most recently served as CEO of WKFC Underwriting Managers/ AgRisk/Ryan National Programs. Ravi Singhvi, president of WKFC Underwriting Managers, will continue to lead WKFC and AgRisk as the attritional property specialty of the merged entity.
Swiss Re’s commercial insurance arm, with U.S. headquarters in Armonk, New York, appointed Katie McGrath as chief underwriting officer. She assumes the role on June 1. McGrath, based in New York City, is currently CEO, North America. She succeeds Kera McDonald, who will serve as Swiss Re’s group chief underwriting officer.
president within its employee benefits group. Based in Atlanta, Georgia, Norris will work with a national client base. Alliant is based in Irvine, California.
East
Sadler Norris joined Alliant Insurance Services as vice
Midwest
Risk Strategies, headquartered in Boston, hired Craig D. Simon as managing director in its national private equity practice. Based in New York City, Simon has over 25 years of experience, previously serving as a team leader for U.S. energy and power at Marsh. Risk Strategies also named Melissa Lewis as chief operating officer, commercial lines. She succeeds Drew Carnase, who is retiring after over 30 years in the industry. Based in Overland Park, Kansas, Lewis joined Risk Strategies in 2023 and most recently served as senior director of business operations.
tered in Dallas, appointed Robert Conyers Jr. as energy practice leader. Conyers joined Brown & Riding in 2017 and became a principal in 2023.
Georgia, appointed Alex Faynberg as executive vice president and head of pet insurer Health Paws. Faynberg is currently division president of Chubb Workplace Benefits.
West
Novatae Risk Group, headquartered in Dallas, named Nick Greggains as president. Greggains has over 35 years of insurance industry experience, most recently serving as president and CEO of Ethos Specialty Insurance Services.
Price Forbes Re (PF Re), headquartered in London, appointed Sherman Power to the newly created role of executive vice president, alternative risk and capital solutions. Based in Dallas, Sherman joins from Aon Re, where he served as global head of innovation and capital advisory.
Southeast
Jami Long joined Robertson Ryan Insurance, headquartered in Milwaukee, Wisconsin, as chief financial officer (CFO). Long most recently served as CFO at WHR Global.
South Central
Brown & Riding, headquar-
Smart Choice, headquartered in Greensboro, North Carolina, promoted Jef Morgan to senior vice president of InsurTech. Morgan joined Smart Choice in 2011 and most recently served as vice president of recruiting.
Westchester, Chubb’s excess and surplus lines company headquartered in Alpharetta,
The Liberty Company, headquartered in Gainesville, Florida, appointed Derrick Martine as vice president, producer, employee benefits in its Irvine, California, office. Martine most recently served as an employee benefits advisor at Morris & Garritano Insurance Services.
LP Insurance Services LLC, headquartered in Reno, Nevada, named Cathy Santoni as director of commercial lines. Santoni has over 30 years of experience, most recently serving as vice president of risk services at Sequoia.
Ashley Powers and Trent Vance joined Alliant Insurance Services, based in Irvine, California, as senior vice presidents within its employee benefits group. Powers most recently served as vice president of client services at OneDigital. Vance served as an area vice president, health and welfare, at Gallagher.
Katie McGrath
Craig Simon Jami Long
Robert Conyers
Nick Greggains
Melissa Lewis
Derrick Martine
Cathy Santoni
Ashley Powers
Jef Morgan
Dear Reader:
Every business has a unique narrative, often intertwined with the personal experiences of its founders. Insurance Journal has had the privilege of encountering and appreciating countless captivating stories within the industry. Over time, we have observed the growth and transformation of the companies belonging to our readers and advertisers.
As a leading provider of industry news and information, we acknowledge that we cannot showcase every corporation that we come across. Our role as journalists also adds a layer of complexity to the process. Therefore, we have created this exclusive supplement to allow our clients and their associates to share their stories, in their own words.
We hope that you find this supplement both intriguing and educational. The team at Insurance Journal sends our best regards.
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THE POWER OF PARTNERSHIP
American Heritage Insurance Brokers owner Tatsiana Tarasava and Smart Choice-Colorado State Director Olga Ivchenko, CIC.
For this independent insurance agent and Team USA Aquathon athlete, partnering with Smart Choice was a winning strategy. After a role as a dedicated agent, she needed more coverage options for her clients and wanted to join a network that had clout with carriers. With over 10,000 partnered agencies, Smart Choice gave her just that along with higher commissions and greater profit sharing. WWW.SMARTCHOICEAGENTS.COM | 888.264.3388
“In a very challenging personal lines market, my state director helped me diversify into commercial lines with their Smart Start program where they provide all the expertise I need.”
THE POWER OF PARTNERSHIP
For this independent insurance agent, former competitive gymnast and winner of the Miss American Queen Pageant, partnering with Smart Choice helped her achieve the balance of full ownership while securing much needed market access. After a series of leadership positions at an A-rated carrier, she wanted to join a network that would help her rise to the top.
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The Castle Insurance Agency owner Jackie Morgan and Smart Choice Virginia State Director Roger Gill
Special Report: Agribusiness
Hard Market, High Tech: Ag Insurance Adapts
By Ezra Amacher
Faced with heightened climate risks and political uncertainties, insurers writing agribusiness and farm and ranch are deploying data analytics and technology as they grapple with a hard market and the need for greater transparency with their agricultural clients.
Insurers are turning to a variety of models for risk assessment and using the data to determine how to accurately assess and price risks in this asset-heavy industry, according to insurance professionals who specialize in agriculture.
“With wildfires obviously being all over the news and certainly being very prominent, a lot of insurance carriers are utilizing wildfire mapping and wildfire scoring systems to determine how likely or how probable [it is that] a certain location would be prone to wildfires,” said Chris Moore, president, EPIC Farm & Ranch.
While wildfires are most prevalent out West, mapping technologies indicate that Texas and Florida are also at risk for wildfires, making it a challenge to place coverage in those states, Moore said.
Carriers have become more cautious about insuring agribusiness in Midwest states heavily prone to severe winds and large windstorms.
“I think that derecho that took place in Iowa several years back made a lot of insurance companies take pause and reanalyze certain wind areas and how they need to map out potential wind severity,” Moore said.
As insurers tackle wildfires and extreme weather events, they’re also keeping a close eye on the uncertainty coming out of Washington, D.C.
“A change in administration can bring out exposures for our members,” said Jeff Gullickson, president, Western Growers Insurance Services. “Potential tariffs could impact their business; we’ve already seen a change in some markets as a result. There’s always a shortage of labor in specialty ag, and any sort of issues around that can impact the availability of that workforce.”
Gullickson said that a tariff in Canada, for example, could drive up the price of fertilizer in the U.S., creating an economic impact on the agriculture industry.
‘If this data could be accessible to the ag producers, it could give them better insight on climate risk and help them to make better decisions to reduce their exposure to the risk.’
“If oil goes up, diesel goes up; tractors and trucks and transportation is all dependent on diesel,” Gullickson added. “So, for the business issues around agriculture, the political landscape can change those week to week.”
A new administration also brings fresh concerns
over funding of the U.S. Department of Agriculture and crop insurance programs. The USDA plays a critical role in funding the ag industry, particularly after natural disasters.
The USDA dispersed $161 billion in financial assistance to agricultural producers from 2019 through 2023, according to a recent U.S. Government Accountability Office report.
The Trump administration has already shown a willingness to cut spending in the department.
“The impact of uncertainty can delay farm expansion and
crop decisions,” said Scott Tuxbury, EVP of Mountain States, XPT Specialty.
In contrast to the prior presidential administration, the White House will likely be less strict in enforcing environmental regulations, Tuxbury added. This could translate to less regulatory concern in the farming and ranching community.
Embracing technology
Insurance companies operating in the agriculture sector have turned to remote sensing, AI, and data analytics to improve risk assessment and claims processing.
“Insurers were early adapters of AI, and it is used extensively
in the underwriting and pricing of farm accounts,” Tuxbury said. “Imagery plays a significant role in individual account underwriting and allows for a more specific risk assessment of properties and locations. The fact that the data is readily available will also be important for the claim processing.”
While such data exists, more can be done to share information with customers about what goes into individual pricing models. Insurers would create more trust with customers by being transparent with how they use data, he said.
“As an industry, I don’t think we do a very good job of explaining pricing or risk assessment to customers,” Tuxbury said. “It is important to help them understand the benefits from AI and remote
sensing, in that they can have a direct impact on their pricing.”
Another way insurers can work with consumers is by sharing climate data they’ve accumulated over the years, according to Tuxbury. Insurers have been reluctant to share this data, which is primarily used for risk assessment, pricing, and risk concentration. Ag producers don’t generally have access to the data.
“If this data could be accessible to the ag producers, it could give them better insight on climate risk and help them to make better decisions to reduce their exposure to the risk,” Tuxbury said.
Other technologies have made their way to the agriculture industry in recent years, such as drones, telematics, and worker sensors.
In many cases the new technologies won’t impact the liability of the customer, Tuxbury said, but in certain cases they will. He pointed to the use of drones for more active activities, such as weed control (spraying) and fertilization, as an area where customers need to exercise discernment.
“This has presented significant liability exposure to those farmers and ranchers,” he said.
As for telematics, there can be a bit of hesitation to implement them in an auto fleet, but there’s direct evidence of the positive impact of telematics on fleet loss records and their claims, according to Gullickson.
‘Insurers were early adapters of AI, and it is used extensively in the underwriting and pricing of farm accounts.’
Whenever data is being collected and shared, it’s vital the broker understands where that information is going, he said, noting the importance of “making sure that you understand as a broker the technology the client is using and the application and how they’re applying that, and are you looking at available coverages to help them with that.”
Hard Market Persists
Insurance brokers specializing in farm and ranch make it clear that market conditions are harder today than in recent years.
“We were in a risk-on environment and we were able to get insurance companies to attach to risk pretty easily,”
Moore said. “Really over the past two years it’s been significantly more difficult to place property insurance. And I would say that statement is true across the entire country.”
Moore said reinsurance requirements are limiting how much risk insurance companies are able to take and pass on. Now if there’s too much risk at any one location or across the portfolio for an insurance company, there are more constraints around capacity, he said.
California, the largest food producer in the U.S., has fewer carriers who want to write agriculture in the state, said Gullickson, whose clients focus on specialty crops. There had been indication of softening in the California property market heading into the year, he said, but that was before the Los Angeles area wildfires.
“Obviously every broker out there is trying to put together property towers using multiple carriers to get coverage in place,” Gullickson said. “We’ve seen alternative funding options such as captives and parametrics. There’s some wildfire parametric coverage available.”
While parametric insurance has been a useful tool to address limitations of the current property insurance market, there’s a need for additional excess and surplus lines capacity, Moore said.
“If an account isn’t getting any offers from the standard market, I would say that there’s very few very excess of surplus line carriers that we can go to and that we can talk about the risk,” Moore said. “I understand that a lot of these companies avoid entering in this market space because it is a very niche area.”
News & Markets
Most Ransomware Claims Begin With Compromised Perimeter Security: Coalition
More than half of ransomware claims in 2024 started with threat actors compromising perimeter security appliances, according to a new report from Coalition.
In its Cyber Threat Index 2025, the insurance provider reported that 58% of claims began with such compromises.
UK-based IT services company
Netcentrix defines perimeter security as “a set of security measures designed to stop external threats from entering your network.” These include firewalls, intrusion protection and detection systems, and virtual private networks (VPNs).
Coalition found that VPNs and firewalls were the first and fourth most exploited technologies used for initial access last year.
The most commonly compromised products fall under a more general category of perimeter security appliances, Coalition said in the report, explaining that these devices “are often built into an organization’s physical networking infrastructure, typically offering both VPN and firewall functionality.” Vendors such as Fortinet, Cisco, SonicWall, Palo Alto Networks, and Microsoft build these products.
Remote desktop software was the second most exploited technology for
ransomware attacks, and email ranked third.
In addition to analyzing what technology was accessed in ransomware claims, Coalition also studied how that technology was compromised. This was defined in the report as a ransomware attack vector.
The threat index reported that compromised credentials were the most common attack vector, representing 47% of known initial access vectors (IAVs) in ransomware incidents. Such attacks typically targeted remote desktop protocol and VPNs, Coalition found, “which provide threat actors with privileged access to internal systems and networks,” the report said.
Coalition reported that software exploits were the second most common known IAV. These exploits typically take advantage of a vulnerable system, the report said. They can range from simple commands that exploit a single vulnerability to advanced espionage software that chains together multiple vulnerabilities, Coalition reported.
“While ransomware is a serious concern for all businesses, these insights demonstrate that threat actors’ ransomware playbook hasn’t evolved all that much—they’re still going after the same tried-and-true technologies with many of the same methods,” said Alok Ojha,
Coalition’s head of products, security.
“This means that businesses can have a reliable playbook, too, and should focus on mitigating the riskiest security issues first to reduce the likelihood of ransomware or another cyber attack,” Ojha said. “Continuous attack surface monitoring to detect these technologies and mitigate possible vulnerabilities could mean the difference between a threat and an incident.”
Coalition forecasted that the total number of published software vulnerabilities will increase to over 45,000 in 2025—a rate of nearly 4,000 per month and a 15% jump over the first 10 months of 2024.
“SMBs lack both the resources to patch a high number of vulnerabilities— requiring dedicated IT staff and testing infrastructure—as well as the experience to focus on the most pressing vulnerabilities,” the report said.
Coalition said its security recommendations are calibrated using data from its 360-degree perspective on cyber risk. Sources include digital forensics investigations, data collected from an internet-wide view by scanning every IPv4 address, proprietary AI models to analyze vulnerabilities and exposed login panels, and actuarial evidence from cyber insurance claims.
My New Markets
General and Professional Liability for Temp Staffing Companies
Market Detail: INVO Underwriting LLC offers general and professional liability for temp staffing companies across the entire U.S. From healthcare staffing to industrial and clerical positions, INVO Underwriting accepts a wide range of staffing operations. Through INVO Underwriting insurers can access StaffShield, a specialized team providing tailored insurance solutions for temporary staffing companies. INVO offers coverage for staffing services: general liability, staffing services professional liability and temporary staffing, or healthcare staffing. Whether a client needs general liability & professional liability as well as other ancillary lines, INVO can cover it. Program highlights include nationwide coverage, fast and easy submissions, ancillary lines, admitted and non-admitted options and competitive commissions. All classes welcome.
Available Limits: Not disclosed. Carrier: Not disclosed.
States: Available in all states and the District of Columbia.
Market Detail: QuoteWell, a tech-driven wholesale broker, offers markets targeting risks with <30% liquor sales (higher percentages considered), noting crime score and loss history will drive assault & battery coverage. Changes such as stricter liquor regulations and evolving consumer preferences can significantly impact risk assessments for dining establishments. Applicants with less than three years of restaurant management experience may be excluded. Ansul systems required over cooking surfaces and maintenance service frequency will be considered. BBQ restaurants need a smoker distance from the building of 10 feet or more. Submission requirements include but may not be limited to loss history, supplemental applications, website/Facebook/Instagram pages and ACORD applications. Minimum Premiums: General Liability: $750; Excess
Liability: $750-$5,000; Liquor Liability (<30% Liquor Sales): $750; and Commercial Property: $3,500-$5,000. Has pen.
Available Limits: Not disclosed. Carrier: Not disclosed States: Available in most states and the District of Columbia. Not available in Alaska, Florida and New York.
Market Detail: EliteMGA, LLC - Home Inspector E&O Insurance offers the essential coverage required to protect home inspectors from potential claims that could cost a lot. Error and omissions insurance offers clients peace of mind and businesses full coverage. EliteMGA’s home inspector insurance is uniquely positioned to offer tailored coverage at competitive rates through their own insurance captive, EliteRE. EliteRE is the first and only insurance carrier 100% dedicated to the home inspection industry and designed with home inspectors in mind. EliteMGA’s staff can customize a plan based on individual business needs to ensure they are fully protected when on the job. EliteMGA partners with HomeGauge and InterNACHI to offer benefits to members. Available Limits: Not disclosed Carrier: Not disclosed States: Available in all states and the District of Columbia.
carrier. Has pen.
Available Limits: $1,000,000 CSL Limit Carrier: Not disclosed.
States: Available in all states and the District of Columbia.
Market Detail: Insurance Allies is a boutique insurance brokerage and part of Specialty Program Group (HUB International), one of the largest sports and entertainment insurance teams in the country. Insurance Allies specializes in niche sectors of the entertainment industry. With a portfolio that includes over 1,000+ entertainment venues across the United States, their team is dedicated to providing tailored insurance solutions for high-adrenaline environments like axe throwing, escape rooms, go-kart facilities, smash rooms and more. Insurance Allies understands that price matters, but their mission prioritizes educating clients and ensuring coverages are comprehensive and aligned with the unique risks they face. Insurance Allies knows that each business is unique, and they take the time to understand what matters most to a business. As an independent brokerage, they have the flexibility to source the best policies from any provider, giving clients access to the most competitive and appropriate options.
Available Limits: Not disclosed.
Contact: Victor D’Angelo; wm@elitemga. com; 800-355-1185.
Unladen Liability
Market Detail: Innovative Risk has developed a mono-line Unladen Liability program for a broad range of customers who have both small and large transportation fleets. Includes available non-trucking liability, trucking liability, heavy trucks, commercial auto liability, short haul trucking and long-haul trucking. In the Unladen Liability program, Innovative Risk can provide underwriting solutions on an admitted basis for high-risk classes of business. Underwriter is A-rated, non-admitted
Carrier: Not disclosed.
States: Available in all states and the District of Columbia.
ASouthern California restaurant has been fined more than $1.1 million over wage theft and sick leave violations.
The California Labor Commissioner’s Office took the action against Food Source LLC, a Buena Park restaurant, issuing penalties for wage theft and failure to comply with paid sick leave laws that impacted at least 90 workers, with 73 employees owed more than $532,000 in unpaid wages, overtime, liquidated damages and incomplete wage statements.
to document sick leave availability on pay stubs and not providing supplemental paid sick leave during the COVID-19 pandemic.
Contractor Fined $430K for California Labor Violations
Aconstruction company was fined more than $430,000 for California labor violations that resulted in unpaid wages, overtime and other violations.
The state’s Labor Commissioner’s Office secured the settlement to return unpaid wages and damages to 86 carpenters employed by the Howood Company Inc. on construction projects in San Diego and San Bernardino counties.
The LCO also filed a lawsuit seeking nearly $576,000 in unpaid wages, damages and penalties related to the employer’s failure to provide sick leave. The suit also addresses violations such as denying workers access to paid sick leave, failing
Under California’s Healthy Workplace, Healthy Families Act of 2014, employees who work at least 30 days in a year are entitled to accrue paid sick leave, which can be used for personal or family health needs. The law requires employers to inform workers of their sick leave rights, document accrued balance and ensure access to leave when needed.
Justice Department Launches Hostile Workplace Probe into University of California
The Justice Department opened an investigation into the University of California to determine if the UC system has allowed an Antisemitic hostile work environment to exist on its campuses.
The investigation, being conducted under Title VII of the Civil Rights Act of 1964, will assess whether UC has engaged in a pattern or practice of discrimination based on race, religion and national origin
against its professors, staff and other employees.
According to an announcement by the Federal Task Force to Combat Anti-Semitism, the investigation aims to determine if the UC system allowed an Antisemitic hostile work environment to exist on its campuses.
According to Leo Terrell, a task force member and senior counsel to the Assistant Attorney General for Civil Rights, following the October 7, 2023, Hamas terror attacks in Israel, there has been an outbreak of antisemitic incidents at higher education institutions.
“The impact upon UC’s students has been the subject of considerable media attention and multiple federal investigations,” Terrell stated. “But these campuses are also workplaces, and the Jewish faculty and staff employed there deserve a working environment free of antisemitic hostility and hate.”
The fines were given to Howood Company, the general contractor, and two other employers, Wermers Multi-Family Corp. and JPI California Construction LLC, for multiple labor violations.
The L CO started an investigation when a complaint was received from the Carpenters/Contractors Cooperation Committee Inc. It was reported that several workers had not received their owed wages, while other complaints of wage theft were made on two additional construction projects involving Howood.
After the investigations, citations were issued for labor violations at all three projects. Howood reportedly did not pay its workers for several weeks on the following projects:
• 1600 Orange Ave, Redlands
• 4354-4364 Twain Ave, San Diego
• 1509-1521 Broadway, San Diego, CA 92101
The L CO is part of the Department of Industrial Relations.
News & Markets
Washington Senate Passes Restitution, Credit Scoring Study Bills
The Washington state Senate passed three bills with insurance implications in mid-March, including a bill giving the insurance commissioner the authority to order restitution to harmed policyholders and a bill studying the impacts of insurance rating factors like credit scores.
Senate Bill 5331 gives the commissioner the authority to order restitution for harmed policyholders. The commissioner can fine insurance entities that violate the law but can’t order them to pay restitution to the people they’ve victimized.
The bill, sponsored by Senator Adrian Cortes (D-Battle Ground), also authorizes
the commissioner to fine property/casualty insurance companies up to $10,000 per violation, rather than issue a total fine of $10,000.
Senate Bill 5589 was introduced by Insurance Commissioner Patty Kuderer and sponsored by state Sen. Bob Hasegawa, D-Seattle.
The bill would enable the commissioner’s office to analyze how insurance companies use credit history and credit-based insurance scores to understand premiums for lines of insurance like homeowners and auto.
Kuderer has raised concern about the reliance on algorithms and data determining premiums. The study would also look at factors that bill proponents believe could create unfair discriminatory barriers for specific groups of residents.
The effort appears to pick up where Washington Insurance Commissioner Mike Kreidler left off. He created a controversial rule banning credit scoring in insurance underwriting, which was challenged in court.
The bill calls for a preliminary report to be submitted to the Legislature by Dec. 31.
The Senate also passed a technical cleanup bill on Monday and passed a bill modifying the authority for fire loss insurance data on Friday.
The bills now move through the House of Representatives and must pass out of that chamber by April 16.
Fertilizer Manufacturer Fined $400K for Washington Worker Death from Toxic Gas
Afertilizer manufacturer has been fined $394,200 for the death of a worker killed by toxic gasses at a work site.
The Washington State Department of Labor & Industries fined Two Rivers Terminal LLC for safety violations following the death of Viktor Voloshin, 56, at its Pasco facility.
On June 7, 2024, surveillance footage showed Voloshin entering a tanker truck to clean it, where toxic hydrogen sulfide gas from fertilizer residue killed him.
Voloshin, who worked for the company for 11 years, was also a father of 12.
L&I cited the company for multiple willful and repeat serious violations, including failing to provide air monitoring, ventilation or protective equipment.
Two Rivers Terminal, which has a reported history of safety infractions, is still appealing pervious fines totaling $672,320.
The company is appealing the latest
penalties. Fines go toward the workers’ compensation supplemental pension fund.
Special Report: Restaurants & Bars
Restaurants and Their Insurance Agents Strive for Stability as Costs Continue to Rise
By Andrea Wells
This year restaurants and bars continue to grapple with many of the same challenges they faced in 2024. The rising cost of labor and food, along with the ongoing struggle to recruit and retain employees, remain among the top concerns for restaurant operators nationwide.
The good news: the restaurant industry is expected to reach new sales heights again in 2025, according to the National Restaurant Association’s 2025 State of the Market report, which projects $1.5 trillion in sales and employment growth of more than 200,000 new jobs.
The positive news doesn’t come without challenges, restaurant insurance specialists told Insurance Journal. Rising expenses again will tighten profits for restaurant and bar operators, which makes the role of their insurance agents and brokers even more critical, they say.
Tighter profit margins in restaurants today are one reason an operator might seek the help of a new insurance partner, John Parkhurst, hospitality practice leader, Trucordia, told Insurance Journal. Today’s market makes it a great time for new growth and opportunity for committed hospitality insurance specialists, he added.
Challenges Restaurants Face
The most pressing issue that restaurants face today is the rising cost of labor. For the average restaurant, in the past four years labor costs have risen 31%, according to the National Restaurant Association (NRA).
“There’s just a lack of people who want to work in the restaurant industry, so that alone drives up your labor costs,” Parkhurst said. “They’re paying dishwashers in the city of Chicago and the suburbs $18 to $20 an hour,” he said. When payroll goes up, so does workers’ compensation costs, he added.
Jon Siglar, executive vice president, carrier relations manager, at ALKEME, which writes mostly high-end chains and national chains in the fast-food, fast-casual, and fine-dining space in California, said it’s a mixed bag for his clientele. Siglar, who grew up in the family restaurant business working almost every position, said some of his clients are doing “amazingly well” today with “sales off the charts,” while others are struggling.
“Where my operators are struggling is in the franchise, fast-food space—those that are now paying $20 minimum wage,” he added. As of April 2024, all “fast food restaurant employees” in California must be paid at least $20 per hour. That wage increase is estimated to have led to 9,600 job losses from September 2023 to September 2024, according to a report by Edgeworth Economics in late November 2024.
The second biggest challenge for restaurants is the rising cost of food, which rose an average of 29% in the past four years, the NRA reported in February. And it’s not just the rising cost of eggs. “Chicken went from $40 a case to $140 a case for chicken wings alone,” Parkhurst noted.
Other expenses for running a restaurant—the building, supplies, credit card processing fees, and insurance—are also going up quickly, the NRA said. Yet, despite the sector’s cost concerns, the market overall is still healthy and growing.
“There’s still more restaurants opening up,” said Dan Beck, vice president at Snapp & Associates, an ALKEME company, which writes restaurants and bars ranging from a single operator taco shop to large fine-dining establishments, primarily in San Diego County, California. “We’re not seeing many closures; it’s just margins are tighter for the operators I speak to.”
“Overall, I think the marketplace has found some stability,” said Kimberly Gore, national hospitality practice leader and chief marketing officer at HUB International.
“If you’re doing what you should and you’re a good risk, then you’re going to see that this year,” she said. “If
you’ve had some issues around claims or different things, then working with a strong broker on some of those proactive things that help an underwriter see what’s going to happen is helpful,” she said.
This is where hospitality specialists can help the most, she said. “That’s the reason that you really have to understand what the restaurant’s doing,” she added. “We’re absolutely going to talk about pricing, we’re absolutely going to talk about markets, but what we really try to do is understand what they’re doing.” What’s their one-year, three-year, five-year plan? she asked. “How do we build something out that’s a little more stable than just being in and out of a market rate kind of environment?” And that starts with risk management and training, she added.
Siglar agrees with that approach. “A big part of what Dan and I do at ALKEME is work closely with our insureds to impact their insurance costs—not only just by trying to find the cheapest quote that has the best coverage but also being proactive” in helping to manage the operator’s risk exposure.
For Siglar and Beck, California’s property market and employer’s liability market—specifically wage-and-hour coverage—can be extremely tough. “Wage-and-hour coverage is getting harder to get for our clients,” Siglar said. In general, restaurants are facing increased litigation, he added.
“We’re dealing with increased litigation from attorneys in California on workers’ comp,” he said. “I just had another one of my continued on page 30
Special Report: Restaurants & Bars
continued from page 29
clients call me yesterday—they rarely have an injury but had to terminate a chef for cause,
Exclusions:
and within five days they were notified of a cumulative trauma claim, so now they have to deal with that.”
Active Assailant Coverage - Oh My!
This market has opened the door for new business opportunities for specialists in hospitality. As restaurant owners search for ways to save money they are more willing to “shop” their insurance.
“It helps to get your foot in the door,” John Parkhurst, Hospitality Practice Leader, Trucordia, said. Start by offering to take a look at their insurance portfolio especially when you know a carrier increased rates 15%, he said. “It wouldn’t hurt to take a look,” he said. “I’ve actually been able to offset some of those increases by just quoting their work comp … getting the work comp down can offset an increase on the BOP side.”
Another way he gets in the door as a specialist is by understanding their business and their coverage and possible gaps. Parkhurst says he often advises prospects on their current coverages and has found that many may not fully understand their policies.
Another area he reviews closely is policy exclusions. “You’re starting to see carriers doing firearms exclusions on their policies and unfortunately that kind of risk can happen anywhere,” he said. He suggests a standalone active assailant policy to those who are missing this critical coverage.
Another coverage gap he has found when reviewing a prospect’s portfolio is exclusions for assault and battery coverage. “I just picked up a couple of nightclubs in Nashville that had no idea that they had assault and battery exclusions on their policy,” he said. “I said, ‘Hey, just so you’re aware, you’re on a general liability policy. You’re insured for a slip and fall and that’s about it. Anybody gets into a fight, you have no coverage.’ And they didn’t understand that coverage was missing,” he said.
Educating clients and prospects on their coverage options brings in new business, he says, even in today’s hard market.
“I think the clients that I deal with appreciate the explanation of all the coverage,” he said. It’s also just good due diligence and best practice to make sure clients are fully covered, he added. “My philosophy has always been to sell coverage first, price second. If somebody doesn’t want an assault and battery just to save a few dollars, I’ll typically walk away from a risk like that.”
Parkhurst says most restaurants today are fighting to keep a very thin profit margin since the pandemic. If their insurance partner can help them reduce their risk and save a bit of money, they will be rewarded with a great client.
Nuclear verdicts in the United States are breaking records, with 27 court cases each awarding compensation of more than US$100 million during 2023, according to Swiss Re executives. Social inflation in the U.S. rose to 7% in 2023—a 20-year high—a situation that is being driven by litigation costs from mega-jury awards, said Dr. Jérôme Jean Haegeli, group chief economist for Swiss Re, who spoke during a press briefing at last year’s reinsurance Rendez-Vous de Septembre in Monaco.
The U.S. Chamber of Commerce has also reported that the number of verdicts above $100 million reached a record in 2023, up nearly 400% from 2013.
‘There’s still more restaurants opening up … We’re not seeing many closures; it’s just margins are tighter for the operators I speak to.’
For the restaurant and bar space, nuclear verdicts can occur from a dispute in a restaurant parking lot to a food safety issue as well as exist outside the restaurant industry, a spokesperson for Society Insurance, a mutual insurance company that specializes in the restaurant sector, told Insurance Journal.
Society Insurance warned that certain states are more prone to “outsized” jury verdicts. “Between 2013 and 2022, California, Georgia, Florida, Illinois, New York, and Texas accounted for 61% of such verdicts in the country,” the insurer said.
Liquor Liability
Liquor liability exposures are generating “nuclear verdict” concerns in some states.
Liquor liability insurance provides protection from litigation involving alcohol incidents. “Laws regarding the selling and consumption of alcohol are not established by the federal government, so agents should know their local liquor laws intimately,” Society Insurance advised.
Local authorities establish and enforce these laws, which means the specific guidelines as to who can sell, purchase, and consume alcohol and under what conditions—as well as the punishments for violation—vary widely across jurisdictions.
“Although all 50 states have a minimum drinking age of 21 and maximum limit for blood alcohol content allowable to operate a vehicle, that’s where the similarities end and differences begin,” Society explained.
“Right now, 42 states and Washington, D.C. have dram laws. The DRAM Shop Act allows third parties or others to recover damages caused by alleged over-service of alcohol.” That means even if a business is not liable in these complicated situations, legal defense costs can add up quickly.
This is a large concern for some restaurants, said David DeLorenzo, CEO and owner of Ambassador Group Insurance and Bar and Restaurant Insurance, based in Phoenix. Casualty lines, specifically liquor liability, have been a pain point for years for restaurant operators in Arizona, he said.
“Property is going to be property; we can always predict,” he said. “But what you cannot
predict is the liability, and what could happen and why, and when you will get sued,” added DeLorenzo, who himself has owned and operated more than 13 restaurants throughout his career. “And that, to me, I think is a problem in every market now in Arizona, specifically with liquor liability,” he said.
“You can get sued for serving one drink to somebody that gets in an accident later that night,” DeLorenzo said. “That
driver may not have been over the legal limit of intoxication, but the fact that you should have known that they were intoxicated when being served could get you dragged into the lawsuit.”
Carriers have said, “We’re not going to write these sorts of establishments anymore,” he said. “Now they may not write establishments that are open past 10 p.m., or that have a band, or have video games,
or are not so heavy in food.” It becomes hard for these type of “fun” establishments to get any “let’s just say affordable coverage” to cover everything that they need, DeLorenzo said. “And if they do get coverage, they need to look out for new exclusions.”
For example, DeLorenzo discussed a client he’s insured for 20 years that is located near a college. “They’ve had a couple of million-dollar [claims] over the past three to four years,” he said. “I’ll be able to find them something, but something is not necessarily good enough anymore, he added. “The best quote I have is a sublimit of $100,000.” The carriers are not going to take a chance on another million-dollar claim, he said, “even though they’ve stated that they’ve done more training, and they’ve put all these things in place to mitigate that [exposure].”
It’s stressful to explain the market every few days to his long-term clients, and now friends, he said.
Liquor is always a critical discussion with underwriters, HUB’s Gore said. That’s why it’s important to have more detailed conversations with restaurants on their exposures to fully understand the risk.
“Maybe the underwriting guideline says that alcohol receipts have to be less than 40% of their food. Well, if you’re in a very high-end finedining restaurant, your alcoholic beverage could be more than an appetizer. It could be more than some of the small end meals,” she said. “So, when you look at a percentage basis, then you also have to look at what is the cost of an average meal.” And be able to explain that to the underwriter.
The same is true for the low-alcohol drinks or no-alcohol cocktails, which are growing in popularity, she said. Those beverages present a lower exposure, so knowing how all that runs through the point-of-sale system is important, she added.
“Everything is about data, and that is going to help a client when they’re in the insurance market,” Gore said.
Why Knowing the Business Really Matters
Parkhurst said his background in hospitality has helped him with clients many times over the years.
“I know when to call them, when not to call them. I know their pain points and pay attention when things change—like the minimum wage goes up, or when food prices go up, that sort of thing,” he said.
“Understanding something as simple as their hoods and ducts and safety things in the restaurant makes it easier to talk their language,” he said.
Parkhurst is not alone in that regard. Many specialty brokers have been working in this sector for decades, both inside brick-and-mortar restaurants and in the restaurant insurance industry. Experience and market knowledge matter more today than ever as restaurants struggle with rising costs of operating their business.
“Restaurants are at the point now where they’re probably pretty maxed out on pricing, so they have to try to find other ways to thrive—either by creating another revenue stream or by lowering their costs as much as possible,” Parkhurst said. That’s where the help of a knowledgeable broker can be beneficial.
Closer Look: Casualty
How to Operate in Today’s ‘Bananas’ Casualty Insurance World
By Susanne Sclafane
Leaders of the casualty insurance practices of a global insurance carrier and a North American specialty brokerage offered insights for insurance buyers and sellers to deal with today’s casualty insurance market during a webinar in February.
Their main message was exactly that: “You have to operate in today’s world.”
Bill Chepulis, head of Large Casualty for U.S. National Accounts
at Zurich North America, made that statement when offering an analysis of what’s fueling continued loss severity—and rate increases—in casualty and transportation lines, which are expected to continue.
The number-one driver is the broken legal environment.
“I can’t solve that today.
And even if I could, by the time it works its way through, the impact is a couple of years down the road, at least,” Chepulis said. “You have to operate in today’s world,” he added during a webinar hosted by Zywave titled “Casualty Craziness: What’s the Cause and What’s the Cure?”
For customers, one way of operating in today’s world is putting in work to become better risks, he said, suggesting that insureds need to pay as much attention to liability risk management as they have been devoting to workers’ compensation
risk in recent years.
“I see it and feel it when I’m sitting down with the customer. There’s a lot of great material—they’re very proud of what they’re doing in terms of mitigating the workers’ compensation risk. And then there’s like 10, 15 minutes around what’s happening on the liability side,” he said, suggesting more attention needs to be focused on contract certainty for general liability and on technology for managing auto risks.
“It’s not a news flash that there is a bifurcated element to the casualty market,” he said, referring to the fact insurers are seeing an unbroken multiyear
period of profits for the workers’ compensation line “offset by continued severity issues in liability—the general liability and the auto lines up through the excess.”
“That continues into ’25,” Chepulis said.
Moderator Jeff Cohen, a Zywave senior vice president, led off the webinar by asking Chepulis and Mike Vitulli, National Casualty Practice leader at Risk Strategies, to lay out their assessments of the current casualty insurance market.
For his part, Vitulli offered a one-word description: “The market is ‘bananas’” from a client’s perspective, the broker said.
“Clients can understand a year or two of increase,” he said. But that’s not today’s reality. The casualty market is now in the sixth year for rate increases by his count. If you’re a client, you’re saying, “Hey, my program is running well. What do I have to do before I stop getting 16 percent umbrella increases?”
Toward the end of the webinar, Vitulli stressed that the difficulties casualty insurance buyers will face in 2025 are not anything like the 1986 hard market where coverage was not available. “For most geographies and industries, it’s available. It just might not be the price point you want,” he stressed, noting that clients are going to continue to deal with having smaller blocks of limits and more participants in their excess towers. “If we can get past the lead $10 [million], you can build a tower. It might take more work, it might take more layers, … but there is still sufficient capacity.”
Casualty’s Flood Zone
Reviewing recent history, Chepulis said severity has “basically doubled since the beginning of COVID, and frequency in the auto line is back to the historical average.”
Jim Blinn, vice president of Client Solutions at Zywave, showed a slide later in the session revealing that the rate per million on excess liability has also doubled since 2020. Blinn’s figures showed the rate
per million for a $50 million excess liability placement rising by 20 percent or more in almost every year since 2020, to $7,700 in 2024. The rate per million had hovered around $3,000 from 2015-2019, he showed, referencing data from a Zywave database of transaction data from brokers and wholesalers.
Like Vitulli’s “bananas” characterization of casualty insurance market pricing, Blinn offered his own unique descriptor of what’s happened to loss severity, rejecting the usual insurance jargon to narrate a slide depicting median loss amounts above $1 million (a typical umbrella attachment point) over the last two decades. “Around 2015, 2016, things started to go a little bit ‘kerflooey,’” he said, noting that the years before that break point showed a median consistently around $2.5 million, rising to $3.0 million and climbing further upward to about $6.0 million in 2024. continued on page 34
Closer Look: Casualty
continued from page 33
“It’s a problem in the sense that I’m not sure that [insurance] companies priced for this. They didn’t anticipate that things would be going this crazy,” Blinn said. “It’s not clear that the prices that were charged for losses that are now hitting policies reflected or anticipated these types of dollar amounts.”
From the customer’s perspective, Vitulli said, “I’m just not sure that people are listening enough to the reality of what the well-funded plaintiff’s bar is doing,” also referring to the impact on insurance company loss costs, which filters through to pricing. “Insurance companies are actually in business to make money, and our clients sometimes forget that,” he said.
While the “shock losses” that are in the news are apparent to everyone, what customers aren’t seeing is “the $250,000 claim that’s now a $3 million claim,” Vitulli said. “Those are the more subtle ones,” impacting lead umbrella carriers and excess carriers who used to price their business
understanding that those levels would happen “once every 55 years… Now, I might have a claim every third year. It’s almost like flood in a flood zone. It’s become an active layer,” he said.
Structure Matters
Echoing Chepulis, Vitulli contrasted the trajectory of workers’ comp and liability results for carriers, suggesting to insurance buyers that combining the good with the bad could help them navigate insurance market challenges. “Let’s face it, whether it’s middle market or upper middle market or large, that [workers’ comp] market is competitive for most risks in most jurisdictions.”
“What does that leave you with, though? It leaves you with the general liability and the auto and the excess,” the broker said, describing the situation faced by clients that have not gone through the work of putting their programs together “with a thoughtful, cohesive structure in mind.”
“You leave yourself with something that’s hard to
What About Industry and Geography?
Cplace,” Vitulli said.
He offered a typical backand-forth between client and broker that starts with the client asking for help with an auto placement, and the client later disclosing that the comp and GL are placed with other
ohen asked the speakers to discuss whether some industry-geography combinations were more palatable for casualty underwriters.
Vitulli said there’s “relatively good competition” for large accounts with high deductibles. “The market is actively looking to write those. If you’ve got a good risk that’s got maybe a small auto fleet, you have a lot of potential competition” also, he said. “It’s the other stuff—where there are wheels or claims or habitational real estate, something with some hair on it, then the market pulls back.” The hard risks are only getting harder to place, he said.
Blinn offered a slide showing judicial hellholes based on the latest report from the American Tort Reform Association, which now includes states like Georgia and Louisiana in addition to well-known centers of civil liability like New York City and Cook County, Illinois.
In terms of industry, Blinn’s loss data showed that manufacturing companies, oil and gas extraction, and companies involved in the management of other enterprises ranked as the three with the highest average losses (among defendants with claims of $1 million or more). On the lower end of the scale were transportation and warehousing, construction and real estate, rental and leasing.
insurers. “I’ve got to tell you, those are almost unsolvable today—unless you can beg Progressive to do it or if you can beg one of your other partners to do it.”
Chepulis agreed. “People ask me all the time, ‘Is this a broad brush’” approach that carriers are taking? “‘Is everybody getting the same 20, 25, 30 percent’” price increase?
“The answer is no. There is ability to differentiate… The first question I ask if an account gets to my desk [is whether it’s] best in class, worst in class, mid class? The next question will be what’s the structure. Do we like the attachment points? Do we all agree that this is a sustainable program? And is this the right relationship? Are we all bought-in in terms of where we want to go and the values between the carrier, the broker, and the customer, and
the buying behavior and why?”
Returning to the central theme of the webinar, Cohen directly asked panelists to offer advice to buyers and sellers navigating the current market.
Chepulis said fitting coverage to exposure is paramount. Specifically, he reminded listeners that primary coverage is fit to handle frequency, while true excess is intended for infrequent severe losses. “I sit down with a customer and then they’re very proud, sometimes, that they only have a few umbrella losses. [But] the umbrella product isn’t made for a few umbrella losses. That’s not something to be proud of.” Instead, carriers are expecting “maybe one in the return period, which should be 20, 30 years. That’s how it’s priced,” he said, imploring buyers and brokers to set the right attachment point.
He also repeated his earlier statement suggesting that conversations aimed at differentiating risk can go a long way with carriers. Some industries have multiple exposures, he said, offering the example of hospitality where underwriters will be thinking about sexual abuse and human trafficking exposures, security protocols, and passenger transport. “As a risk manager, you have to be able—without hesitation—to articulate what you’re doing to control and mitigate those risks, and how are you best in class…how are you investing—not just today, but how are you planning to invest in the future to stay ahead of the curve from a technology and from a control standpoint,” he said, offering the PFAS and third-party hauling risks of the manufacturing sector as a second example.
Finally, Chepulis advised, “Now is not the time to go on the cheap” with claims handling. “The dollars and pennies that you’re saving upfront is going to cost you in the end,” he said, referring to motivations geared toward the most efficient claims services. “Now is not the time to go on the cheap both from a coverage and from a servicing standpoint. In fact, I would actually do the opposite because all it’s going to take is one claim, and the return period on those savings is not going to work out,” he said.
“How do you become a better risk? How do we help our customers become better risks? And then when there is a loss, do you have the best claim handling to respond?”
“It could be a carrier. It could be a TPA… There are definitely customer classes out there
where I’d say, ‘This TPA might have a better solution.’ If it’s a better outcome, I’m all for it, because at the end of the day, I’m looking for the best outcome for the customer and for us,” he said.
Vitulli offered advice directly to brokers: Protect your E&O and negotiate the entire program, he urged. “Protect your E&O by always offering higher limits to your customers,” he said. Anticipating objections like, “I’ve known this client for 10 years [and] I know they’re not going to buy anymore,”
Vitulli said. “Tomorrow when they have a $52 million claim and you only offered them $50 [million], they’re going to point the finger at you.”
Sclafane is executive editor of Carrier Management, a publication of Wells Media Group serving property/casualty insurance carrier executives.
Closer Look: Casualty Casualty Reinsurance Capacity Is Plentiful but Availability Crisis Could Be Looming
By L.S. Howard
Reinsurers continued to provide ample casualty reinsurance capacity through the recent January 2025 renewal season—despite concerns about adverse reserve development—however, an availability crisis could be looming, AM Best cautions.
Market Segment Report
In a new report, AM Best points to rising litigation costs, higher jury awards, and a broader interpretation of policy coverage—driven particularly by U.S. social inflation trends— which have placed substantial pressure on many global reinsurers to reassess pricing models and reserve adequacy.
Indeed, in 2024, many global reinsurers reported reserve strengthening efforts to combat adverse development, according to the AM Best report, titled “Casualty Reinsurance Capacity Remains Plentiful Amid Concerns.”
The question is whether premium rate increases can outpace social inflation loss trends. U.S. reinsurers with a casualty reserve portfolio that gain 8%-10% in rate increases are not keeping pace with loss cost trends, while markets that are pushing 15%-20% rate increases will be the ones that could overcome these challenges, said AM Best, citing comments made by panelists during its January 2025 renewal briefing.
Casualty Market at Crossroads
The problems with adverse loss development are not anticipated to slow in the near term, and the underlying business will continue to deteriorate as social inflation drives up loss costs. As a result, the casualty market is headed for a crossroads, the report affirmed.
“A few years ago, the property reinsurance market
It is somewhat difficult to observe casualty performance year by year when adverse development takes place. However, AM Best examined developed accident-year loss ratios for the past 10 years and combined them with calendar year expense ratios for the associated year. That combined ratio was compared to the industry investment yield for that calendar year to generate an implied margin. What AM Best found was that certain casualty lines had negative margins in 2019 and prior, where most of the companies booked their development at year-end 2023 (Exhibit 3). Additionally, 2019 was the year in which paid reserves constituted more than 50% of developed reserves. For year-end 2024, many companies indicated some development from accident years 2020-2024. In AM Best’s view, these margins could continue to deteriorate.
underwent dramatic changes and has since performed generally well through active loss years. But the casualty issue is much more complex and cannot be resolved through
Other Liability Claims Made – Estimated Combined Ratio by Accident Year ($billions)
AM Best found that certain casualty lines had negative margins in 2019 and prior, where most of the companies booked their development at year-end 2023. Additionally, 2019 was the year in which paid reserves constituted more than 50% of developed reserves. For year-end 2024, many companies indicated some development from accident years 2020-2024. AM Best said these margins could continue to deteriorate.
Barring any broad tort reform, social inflation trends will likely continue to worsen. However, reforms are unlikely if reinsurers are willing to write the business. The January 2025 renewals demonstrated that reinsurers are inquiring more about insurers’ casualty operations, but those insurers have still been able to find ample capacity for their programs. If insurers are able to purchase reinsurance for their casualty books, they will continue to write high
If
will continue to vex the industry until some reform takes place.
simple changes to attachment points or underlying terms.”
Insurers and reinsurers are playing catch-up with rates, and many companies say they will continue to get strong rate increases despite these loss trends, AM Best said, posing the relevant question: “When is enough going to be enough?”
Property vs Casualty
“Casualty reinsurance, for the most part, is driven by quota share contracts. Thus, reinsurers rely heavily on ceding insurers to deploy prudent measures to combat these trends, with minimal tools on their end to fix troubled accounts,” the report explained.
While some reinsurers indicated that they would be scaling back casualty exposures in upcoming renewals, capacity remained abundant during the
January 2025 renewals, “and there was no talk of hardening rates or dramatic shifts in terms and conditions,” AM Best said.
‘A few years ago, the property reinsurance market underwent dramatic changes and has since performed generally well through active loss years. But the casualty issue is much more complex and cannot be resolved through simple changes to attachment points or underlying terms.’
“Reinsurers have apparently not had the same sense of
urgency they did just a few years ago with property lines.
The lack of urgency could be driven by several factors, but it likely begins with investor sentiment,” the report continued.
Investors Favor Casualty Lines
AM Best explained that the reinsurance market is often influenced by investor appetite, and investors appear to prefer casualty lines.
“In 2022, the lack of investor willingness to absorb property market volatility on traditional reinsurance balance sheets led many reinsurers to reduce their capacity for higher volatility property lines. Much of that capacity was redirected into casualty lines, which the equity markets appear to favor.”
AM Best examined publicly
traded reinsurers’ stock prices over the past 20 years and found that reinsurers with higher allocations to casualty lines saw a higher average yearly increase in stock prices compared with those with higher allocations to property lines.
“Additionally, those with higher property allocations generally traded at lower priceto-book value multiples over the same period.”
ILS Investors
This data contrasts with the drastic expansion over the same period of the insurance-linked securities (ILS) market, which writes property lines coverage almost exclusively, the report said, noting that ILS vehicles provide
investors with “customized levels of volatility, for a shorter time frame than may be available in traditional reinsurer/ start-up models.”
It is becoming more evident that ILS vehicles “can offer investors similar, or even superior, levels of return on risk capital for property reinsurance business,” it added.
“What they struggle to compete with traditional reinsurers on is casualty lines, owing to the longer-tailed nature of the business, which can trap capital and lead to uncertain investment horizons,” the report said. “Therefore, investors’ only access to casualty business is by investing in traditional reinsurers, which drives their value up as they write proportionally more casualty business.”
Spotlight: Boats & Marinas
10 Things to Know About Insuring Boats & Marinas
By Jahna Jacobson
1
The global boat insurance market size was projected at $1.8 billion in 2024 and is expected to hit $2.6 billion by 2032. The U.S. region accounted for an 87% share of the boat and yacht insurance market.
2
In 2023, the boat insurance segment accounted for over 63% of the boat & yacht insurance market share and is expected to exceed $1.7 billion by 2032. Boat insurance
includes smaller recreational crafts such as speedboats, fishing boats, and personal watercraft.
3
Regarding water vessels, 33% of all lightning claims are from Florida, where the strike rate is 3.3 boats per 1,000. The majority of strikes are on sailboats (four per 1,000), but powerboats get struck also (five per 10,000).
4
Stricter rules and specifications of marinas
At a Glance: US Recreational Boating
• There are 11.96 million registered recreational boating vessels in the U.S., with 11.1 million mechanically propelled in the U.S.
• Florida is the U.S. state with the highest number of registered recreational boating vessels.
• Other watercraft users include 18.6 million kayakers, 9.6 million U.S. canoers, and 3.46 million sailing participants.
• All states require a specific education requirement to operate a boat, including basics such as operator laws, safe operation practices, and regulations.
U.S. Boating Accidents
• In 2020, the Coast Guard counted 5,265 incidents involving 767 deaths, 3,191 injuries, and around $62.5 million of damage to property caused by recreational boating accidents.
• Alcohol was the leading known contributing factor in fatal boating accidents in 2021, accounting for 86 deaths, or 16% of total fatalities. Operator inattention, inexperience, improper lookout, machinery failure, and excessive speed ranked as the primary contributing factors in accidents.
• Where instruction was known, 77% of deaths occurred on boats where the operator did not have boating safety instruction. Only 12% occurred on vessels where the operator had received a nationally approved boating safety education certificate.
• Where the cause of death was known, 75% of fatal boating accident victims drowned; 86% of drowning victims weren’t wearing a life jacket.
• Where length was known, eight out of every 10 boaters who drowned were using vessels less than 21 feet in length.
Sources: Marsh McLennan Agency “2025 Yacht Risk & Resiliency Report,” Business Research Insights Boat Insurance Market Report, American Boating Association, Safe Boating Council, U.S. Coast Guard, Global Market Insights “Boat & Yacht Insurance Market Size - By Insurance, By Policy, By Sales Channel, By End Use, Analysis, Share, Growth Forecast, 2024 – 2032”
and lending institutions are driving the yacht insurance market.
Many demand proof of insurance before letting boat owners park or finance their vessels.
5
Liability insurance covers a boat’s owner if an incident harms another person or damages another person’s property. Comprehensive insurance covers damage or loss to a vessel caused by theft, fire, vandalism, and natural catastrophes.
6
59% of the boat and yacht insurance market comprises agreed-value policies. Under an agreed value policy, parties agree on a specific value for the vessel at policy issuance. In the event of a total loss, the policyholder receives the agreed-upon amount, regardless of depreciation or market fluctuations. This is especially important for luxury vessels that may have significant customization or enhancements. The remainder of the market is made up of cash value policies.
7
Yacht ownership has grown sharply since 2019. 2021 was a record year for yacht sales, and even though the volume overall fell in 2022, sales remained 44% higher than the average for the prior 12
years. New-build yacht orders surged 54% in 2022, even as preowned yacht brokerage decreased by 30%.
8
Since 2019, the yacht insurance market has experienced a significant disruption reflecting natural catastrophe losses and higher reinsurance costs, leading to mid- to high-double-digit hikes in hull premiums for virtually all yacht owners.
9
Older yachts, those located in areas at increased risk for lightning or catastrophic weather events, higher-speed vessels, and
adverse loss history can have higher premiums. Superyachts, those over 80 feet, represent a subset of yacht risks, including crew considerations, navigational challenges, shipyard visits, and chartering.
10
The market can be divided into ocean, lakes, and rivers. Ocean is expected to hold the most boat insurance market share in the upcoming years.
80 results for ‘cyber liability’
Idea Exchange: Is It Covered?
Logic & Language and Forms & Facts Wildfires and Government Action Exclusions
One of my first visuals of the conflagration in Los Angeles was a video of vehicles on the streets in the Pacific Palisades community being bulldozed to clear room for emergency vehicles. With traffic snarled as residents attempted to evacuate the area, many were forced to abandon their vehicles where they stopped.
So, sadly, one of the first things that popped into my head was the question of whether the bulldozer damage, or ultimately for some vehicles, the fire damage, would be covered by auto insurance. Whether there is coverage depends on the cause of loss that triggers the insuring agreements and any potential exclusions that might apply.
By Bill Wilson
Let’s examine this issue under both auto and property insurance policies.
Personal Auto Insurance
Would damage caused by a bulldozer trigger collision coverage? Would fire, as a proximate or ultimate cause of loss, trigger comprehensive coverage? Aside from possible deductible differences, whether these might be comprehensive or collision claims is largely immaterial.
But what about exclusions? The one that comes to mind, using the ISO PP 00 01 Personal Auto Policy as an example, applies to:
“A total loss to ‘your covered auto’ or a ‘non-owned auto’ due to destruction or confiscation by governmental or civil authorities. This Exclusion…does not apply to the interest of Loss Payees in ‘your covered auto.’”
First, note this exclusion only applies to “total” losses, and the language doesn’t distinguish between physical loss and a constructive total loss based on valuation.
Second, oddly enough, this “government action” exclusion is far less common
under business auto policies than personal auto policies.
So, does moving these vehicles constitute “destruction,” or does that word imply willful and intentional damage as opposed to moving vehicles simply to clear the way for government vehicles?
This exclusion can potentially be triggered in several ways. For example, in one claim I consulted on, an auto was stolen and used in the commission of a felony. As a result, law enforcement took possession of the vehicle as evidence and impounded it for over a year. The auto insurer denied the claim based on a lack of “direct” damage (which made no sense) but largely based on the “confiscation” exclusion.
A perceived injustice in this claim was that, if the vehicle had simply been stolen and not found for over a year, most insurers would have paid this as a theft claim under comprehensive coverage. But the intercedence of law enforcement to “confiscate” the vehicle removed coverage for the insured.
If the history of this exclusion is examined, you’ll find that it exists primarily for the purpose of prohibiting
insurance recovery for parties engaged in criminal acts such as drug dealing, RICO violations, etc. That seems reasonable, but not in the case of innocent insureds who are the victims themselves of a crime or a government action beyond their control. Adding insult to injury, the exception to the exclusion extends coverage to the loss payee but not the insured.
This type of exclusion is not limited to auto insurance.
Homeowners and Commercial Property Insurance
You’ll find a “government action” exclusion in most homeowners and commercial property policies. For example, ISO’s HO 00 03 homeowners policy excludes:
“…the destruction, confiscation or seizure of property…by order of any governmental or public authority. This exclusion does not apply to such acts ordered by any governmental or public authority that are taken at the time of a fire to prevent its spread, if the loss caused by fire would be covered under this Policy.”
ISO’s CP 00 10 commercial property form’s Government Action exclusion applies to:
“Seizure or destruction of property by order of governmental authority. But we will pay for loss or damage caused by or resulting from acts of destruction ordered by governmental authority and taken at the time of a fire to prevent its spread, if the fire would be covered under this Coverage Part.”
In March 2021, I blogged about a 76-year-old homeowner whose Texas home suffered $50,000 in damages from a shootout between police and a fugitive that involved explosives, tear gas grenades, and armored vehicles. An appeals court found that immunity statutes barred her recovery from the government and the U.S. Supreme Court declined to review the decision.
More important for our discussion here is that her homeowners insurer also denied the claim, citing the Government Action exclusion in the policy. These claims are not common, but they’re not rare either.
For example, in 2020 a similar incident occurred for a Colorado family whose home was largely destroyed by a SWAT team attempting to apprehend a fugitive.
In 2022, a California printing business experienced a similar loss under its commercial property policy and, in a separate incident, an Indiana homeowner’s house was damaged during a police search for a suspect who had never been there.
‘Would
damage caused by a bulldozer trigger collision coverage?
Would fire, as a proximate or ultimate cause of loss, trigger comprehensive coverage?’
In the case of the Los Angeles conflagrations, we’ve heard stories of extensive looting of homes not damaged by fire itself. If, in attempting to apprehend looters, the property is damaged by governmental authorities, presumably they would be immune from claims and the property owner would likely have little or no recourse against their insurer.
In cases like these, the innocent property owner typically has little or no recourse against the government or their insurance carrier. And, given that these policies typically only cover direct damage, even if there was coverage for damage caused by a governmental authority, the diminished market value of the property can be significant, as was the case for one homeowner who ultimately sold her home at an alleged $100,000 less than the original asking price.
A Question of Fairness?
My argument FOR coverage under existing government action exclusions is
that these types of exclusions were never intended to apply to situations like those discussed in this article, but rather to damage that arises proximately from the illegal activities of insureds. I think this premise is supported by exceptions in property policies for preventing the spread of fire and in auto policies for extending coverage to innocent loss payees.
I also point to language like “destruction, confiscation or seizure of property… by order of any governmental or public authority.” Is the government actually “ordering” destruction of property, or are they ordering an action to, for example, apprehend a criminal that unavoidably results in damage to property?
So, as referenced earlier, in 2021 I blogged about the issue, asking the question in the title of my blog post as to whether it was “Time to Make Government Action Exclusions More Equitable?”
What do YOU think?
Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of six books, including the Amazon 4.8 stars “When Words Collide…Resolving Insurance Coverage and Claims Disputes,” which BookAuthority ranks as the #1 insurance book of all time. Email: Bill@InsuranceCommentary.com.
Idea Exchange: Agency Management
6 Steps to Breathe New Life Into the Agency’s Growth Strategy
Nothing works forever. Or at least it will not work as well as it may have in the past. This is especially true when it comes to a business’s strategy for growth.
By Tony Caldwell
The economic environment fluctuates and these shifts require business leaders to take action to maintain growth. New competitors entering a market or a variety of other factors can lead business leaders to re-evaluate their strategies to continue growing on a healthy trajectory.
Humans tend to believe what is happening to them in the moment will continue. This occurs when their businesses are enjoying robust growth, as well as when success starts to wane. But the fact is that things do change. So, a continued path of strong positive growth requires periodic, if not constant, adjustment. Let’s look at
six steps you can take to ensure that your business’s growth will remain positive and not falter.
1. Take the time to review and weed out less successful ventures.
Step back and look at the last five years of your agency’s performance.
Ask: Where are we excelling? What have been the key drivers of our growth and profitability? What actions have we taken, what capabilities have we acquired, or what investments have we made that have been especially successful?
Analyze your answers carefully. Compare them to benchmark data like that available in the Best Practices Study published by the Independent Agents and Brokers Association. Rank your initiatives by results.
Calculate your return on investment on the different strategic initiatives based on this review. Ask yourself which ones have been the least profitable. Consider
jettisoning one or more that don’t measure up to the most profitable. It’s often difficult to stop doing something that is making you money, but the question to ask here is: Can I increase investment in my winners to boost (or sustain) my growth and profitability? If the answer is yes, then the action needed is obvious.
Many years ago, we made a decision at my retail agency to give away our personal lines book. We also imposed commission thresholds for clients and terminated those who would not or could not meet them. That was temporarily painful but ultimately resulted in financial growth and increased team capacity enabling us to focus on our winning commercial lines business and fueling double-digit growth for the next decade.
No one can do everything they want or pursue every opportunity they have. Time and resources always limit us. So, the important thing to remember here is: What you say “no” to is often more important
than what you say “yes” to.
2. Celebrate your successes.
This may seem like an odd step for creating continued success, but I think it’s essential. Recognizing your success, sharing it with your team, and intentionally acknowledging and celebrating what you’ve accomplished does two powerful things that fuel future progress.
First, it enhances your confidence. The future is always uncertain and courage is always required to move into it boldly. Recognizing and celebrating your success is a confidence-creating superpower. And confidence, I think, is the entrepreneur’s greatest off-balance sheet asset.
Second, celebration helps you avoid falling into what Dan Sullivan, founder of The Strategic Coach Program, calls “the gap.” The gap is created when we constantly measure ourselves against the future and how far we have to go. Driven business people are always moving the goal posts. This creates stress and robs confidence. It creates a gap between how we perceive our progress and what our progress really is. Turning around, measuring from where we came from, and celebrating that progress eliminates the fear, confusion, and frustration that the gap creates.
3. Double down.
Now that you’ve weeded out your weaker initiatives, take the resources you have freed up and use them to increase your investment in your winners. Doing this will sustain your momentum during the next critical phase. While this is a nec essary step, it is important to remember this doubling down will only sustain your growth arithmetically. In other words, it is not likely to power your future growth at the same percentage rates as in the past. Plus, it gets harder to maintain a given growth rate as the numbers get larger.
4. Go on a vision quest.
The Native Americans from the American Great Plains used a process called “the vision quest” to help their young warriors find a vision for their future. These brave young people had demonstrated
success early on, and they now embarked on a deliberate process to determine their future. The results of their quest often became the experience that defined the rest of their careers as warriors as well as their lives.
‘Consider
investing in complementary or ancillary
products or businesses that can further leverage your capabilities or client relationships.’
In the same way, successful business people need to continually update their vision for their business’s future. Set time aside periodically after your review and celebration process to think about where you want to be in three, five, and 10 years—even 25 years. Describe, in writing, what the future looks like. Be as detailed as possible.
Now, look at your industry and ask: What opportunities are developing? What is changing? What are other’s missing? What capabilities do we have to capture these new opportunities, or what capabilities do we need to develop?
For example, should you be investing in artificial intelligence (AI) now to create results three years from now? Where should those investments be made? Should you be changing your mix of business to become more profitable or grow faster? Is there a community you should be adding to your footprint to stay in or move into the path of economic development?
Consider investing in complementary or ancillary products or businesses that can further leverage your capabilities or client relationships. An example here may be wealth management companies attempting to enter the insurance distribution business. While execution in this space has not been stellar, the idea is sound. How can you do the same with your business?
5. Commit to investing.
With success often comes the temptation to spend money on the things you’ve denied yourself while funding your growth. But the truth is that continued growth requires continued investment.
I am not suggesting you should not be rewarded with, and enjoy, the fruits of your labor. What I am suggesting is that, as a former business partner taught me long ago, you pay the business first. Determine how much of your current and future profits you will hold for investment, and do that in a disciplined way. This will result in greater personal rewards as the business continues to grow rather than plateau or falter.
6. Repeat.
As you make new plans, pivots, and investments, commit to measuring your progress quarterly and annually. As you manage the business through these periods, repeat steps one through five at least once a year. Soon the process of changing priorities or directions, abandoning mediocre results, and doubling down on successes while celebrating them will become as familiar and comfortable as changing your clothes.
ep back and look at those who have achieved remarkable success over time, we usually see there was no magic involved and nothing remarkable about them or their physical resources. What they often have, though, is structure and discipline, as well as joy in how they operate. This is the path to extraordinary—and es six simple steps.
Caldwell is an author, speaker, and mentor who has helped independent agents create more than 250 independent insurance agencies. Learn more by visiting www.tonycaldwell.net or contacting him at tonyc@oneagentsalliance.net.
Idea Exchange: Talent
The Insurance Industry’s Talent Crunch: Attracting and Retaining Gen Z
The last three years have exposed a growing challenge for insurance carriers: attracting, hiring, and retaining young talent. Despite the passing of the so-called “Great Resignation,” the insurance industry continues to face significant workforce challenges.
By Heather Wilson
The Bureau of Labor Statistics projects that while the total number of claims professionals will decline by 5%, the industry will face approximately 21,500 job vacancies each year over the next decade. If current trends persist, the rate of new hires simply cannot keep pace with retirements and other departures.
This growing talent shortage is compounded by a rise in the severity of claims and by the industrialization of plaintiff litigation. As veteran employees leave the workforce, the industry loses invaluable expertise. That creates a ripple effect of challenges for claims management organizations. Unfortunately, existing systems and practices are not well-equipped to address this problem. Members of Generation Z bring fundamentally different goals and expectations to the workplace, shaped by their coming of age in the digital era. That calls for new ways of approaching the talent shortage.
Understanding Generation Z
Gen Z, which makes up one-third of the world’s population, has distinct workplace
preferences. A striking 77% prioritize work-life balance, while 92% emphasize the importance of mental health in the workplace. This generation is heavily mission-driven, gravitating toward employers that embrace corporate social responsibility and whose core business activities contribute to the betterment of society in ways that are easily and intuitively apparent.
Those of us who work in the industry understand quite well that insurance contributes to our well-being on a broad scale. Workers’ compensation carriers, for example, help injured employees recover and return to normal as rapidly as possible. Yet our highly impactful mission often goes unnoticed by the public, who often regard the industry as being outdated, callous, and impersonal. The recent tragic murder of UnitedHealthcare CEO Brian Thompson—and the shockingly muted reaction from some quarters— serves as a stark reminder that such negative perceptions can be harsh and persistent.
Our industry needs to do a better job of telling the real story. Workers’ compensation insurance, for example, has had a transformational impact on employees around the world. A century ago, workplace injuries were frequently life-altering events that could leave entire families destitute. Today, job safety is a priority because insurance carriers understand and assess risk and because we incentivize behaviors that mitigate risk. That reduces the incidence of health and safety problems for everyone, and when workers do suffer an injury, insurance carriers prioritize a rapid and complete recovery. Highlighting these kinds of contributions will help us bridge the gap between negative perceptions and positive realities.
Meeting Gen Z Workers on Their Terms
To attract Gen Z talent, insurance carriers must meet potential hires on their own terms. Mission-driven
alignment is critical, but there are additional factors to consider.
Remote work, for example, gained significant popularity in the wake of the COVID pandemic, yet Gen Z employees tend to favor in-office work where they can enjoy face-to-face interactions with fellow workers.
They strongly prefer to work with modern tools and technology as well. Today’s younger workers value a good user experience (UX), for example. That’s bad news for many employers in the insurance industry, especially if they fall on the trailing edge of the technology adoption curve. Mainframe applications and green screen terminals are still standard fare in many insurance organizations. By modernizing core systems, offering a fully integrated collaborative experience, and adopting forward-looking tools like machine learning and generative AI, insurers can provide a more enticing experience for their Gen Z employees.
‘Gen Z, which makes up onethird of the world’s population, has distinct workplace preferences. A striking 77% prioritize work-life balance, while 92% emphasize the importance of mental health in the workplace.’
Becoming a Comp Talent Destination
Transforming your organization into a talent magnet requires deliberate effort. Here are four key strategies:
• Clarify core values: Define your organization’s mission and ensure it is evident in every interaction, both internally and externally. Communicate those values in everything you say and do.
• Empower employees with modern tools: Invest in advanced core systems, integrated collaboration platforms, AI-driven insights, and generative AI technologies to enhance both efficiency
and engagement.
• Articulate career paths: Provide clear, well-communicated opportunities for professional growth and progression.
• Develop strong training and mentoring programs: Create structured onboarding and development programs to nurture talent and pass on industry expertise.
The Evolving Role of AI
AI is transforming the insurance industry with tools capable of addressing both operational and talent management challenges. AI-based claims guidance, for example, reduces operational burdens by automating repetitive, mundane tasks and analyzing large bodies of information. It also enhances recruitment and retention because it makes work more fulfilling. AI takes on many of the most tedious tasks that could not have been automated in the past. That allows employees to focus on making prompt,
meaningful, data-informed decisions and to bring a human touch to claims management.
AI plays an especially powerful role in delivering better outcomes for injured workers. Naturally, that’s a win-win. It improves the lives of the people we serve and their families, but it also reduces losses. Additionally, AI improves fraud detection, allowing insurance carriers to avoid costs that ultimately flow down to policyholders in the form of increased premiums.
By leveraging AI, insurance organizations can streamline operations, improve employee satisfaction, and deliver superior service to their customers. These innovations are key to becoming a workplace of choice for the next generation of insurance professionals.
Like most long-term trends, this emerging talent shortage has the potential
to creep up on many employers in the insurance industry. That need not be the case, however. By modernizing technology, aligning with Gen Z’s values, and embracing a visionary approach to AI, insurance carriers can position themselves as aspirational destinations for the emerging generation of employees.
Wilson, chief executive officer of CLARA Analytics, has more than a decade of executive experience in data, analytics and artificial intelligence, including Global Head of Innovation and Advanced Technology at Kaiser Permanente and Chief Data Officer of AIG. While at AIG, she was named Insurance Woman of the Year by the Insurance Technology Association for her data innovation work. Wilson has been a steady supporter of diversity. She launched the Kaiser Permanente Women in Technology group, focused on mentorship and retention for women in math, technology and science, and at AIG, she launched Global Women in Technology and served as Executive Sponsor of Girls Who Code.
Idea Exchange: Minding Your Business
Pro Forma Development for Budgeting & Agency Value
Whether an agency owner is looking to streamline their operation to do their annual budget, make more profit, or ascertain agency value for an internal valuation or potential sale, creation of a pro forma income statement is important.
Budget Creation
By Catherine Oak
Many agencies do not have budgets—but they should. It does not work to just show certain percentage increases for most
expenses and compensation. Each line item should be evaluated with managerial and financial staff to determine what is really needed.
Accounting can take a first crack at this process and should remove non-recurring or discretionary items and leave in the expenses that are necessary and ongoing for the department heads and owners to then take a look at. It is best to do a budget by department, which could include personal versus commercial lines, employee benefits, and individual health versus life insurance. Any niche programs can also have their own budget, such as programs. If an agency has created a
separate small commercial department, those expenses should be segregated to see if any profit is being made. Making profit on small accounts is hard, especially if producers are also being paid for writing these accounts.
Profit Center Accounting
As described above, if possible, segregate the revenues by department and the related expenses. If there are expenses for the whole agency, such as owner management salaries, postage, repairs, and maintenance, then often using the revenues to the total percentage to separate these expenses can be used. Or
if the expense is related to the number of people, like rent, then the number of people and producers in that department to the total personnel percentage can be used to assign these expenses.
Internal Valuation
Once the pro forma income statement is created and management has signed off on the necessary expenses for the agency, the true agency profit can then be used for valuation purposes.
For internal valuation purposes, we use the profit and then do two or three valuation methods. First, we use the Capitalization of Earnings method that establishes the price a buyer could pay in order to yield a specific required rate of return on investment. This method of determining value is widely used in the financial industry. It is also widely utilized by knowledgeable buyers and sellers of independent insurance agencies.
The methodology first determines a riskfree rate, ordinarily U.S. Treasury bonds of 20 to 30 years maturity. A separate risk premium rate, based on the inherent risk of the agency, is then added to the risk-free rate to determine the total rate of return a buyer would require if he/she invested in the agency. The additional return required is usually in the range of 5% to 15%. The greater the perceived risk in an investment, the higher its return should be.
Then we use the Price Earnings method, which is most often used by major public corporations when acquiring or merging with another firm. Publicly traded insurance brokers have historically utilized this method in acquiring other agencies.
As a multiple of pretax earnings, the P/E multiple has averaged 7.0 to 10.0. The P/E multiple, however, is usually discounted before applying it to a prospective seller’s earnings because the buyer does not want to dilute their own earnings and the potential seller typically carries a higher level of risk. Most insurance agencies are valued somewhere between 6.0 and 9.0 times their pretax earnings by other independent agency buyers.
The method determines the value of the firm by multiplying sustainable pretax income by an adjusted price/earnings ratio
of publicly held insurance brokers. This price/earnings ratio has been adjusted to reflect the comparative attractiveness and risk of the firm being valued. Regional and national brokers, especially those backed by PE firms, use a 9 to 12 times pretax earnings multiple depending on the firm’s profit margin and risk of earnings continuing in the future.
The Discounted Future Earnings method is too complicated to be able to write about here, so use the two above and average them. Often working capital is also removed for 30 to 45 days of pro forma expenses.
Multiple of Revenues
The multiple of revenue approach for valuing a business is outmoded and is not recommended by most professional consultants. This method survives by word of mouth and misunderstanding. Multiples published in trade journals or consultants’ newsletters after a sale is a reference used to communicate the purchase price but does not detail the actual approach to the establishment of that price.
Even though some transactions still occur today using the multiple of revenue approach, it is being done out of ignorance of more accurate methods. Paying 1.5 times to 2.75 times revenue will save you time but will cost you money.
When a valuation uses a multiple of revenue it ignores variation in profitability and risk. Two firms with the same revenue may vary significantly in both the risk that profit will be sustained as well as in the actual profit margin. An astute buyer would not pay the same revenue multiple for both firms.
Third-Party Valuation & Terms
Multiples used for the valuation methods described above are much higher than for internal valuation. There would also be other expenses a third party would remove that may not be needed or allowed under third-party ownership. Assume a higher profit and multiples for the Capitalization Method and Price Earnings multiples in the 9 to 12 range. Most of the time, 80-90% of the value is paid up front, with some stock in the 10-15% range and a growth
bonus. This is why so many agencies have sold to brokers with private equity backing in the past five years. Internal buyers— often family or key employees—could not compete with these prices.
Third-Party Prices Being Paid Today
The typical sale price today is 1.75 to 2.75 times revenue if paid for in cash and the firm is making at least a 25-30% profit. If terms other than cash are used, it will affect the value of the firm. Many owners ignore this when discussing value received, thereby adding to the myth of owners receiving prices of 1.5 times to 3.0 times revenue. Present value needs to be calculated on future payments received. Astute buyers often base terms on retention of revenues and may pay a slightly higher value for lowering their risk. The goal should be to pay the seller using the profit created by the agency or book being purchased. If the acquisition generates a 20% profit margin, a buyer will need five years before realizing any profit, assuming the buyer only pays 1 times the revenue. If 2 times revenue is paid, it would take 10 years before a buyer realizes a profit. This assumes the firm can generate a 20% profit margin before excess compensation to owners. Today, many agencies or books generate profit margins of only 10-18%. Many buyers do not want to buy a firm that can’t generate a 25% to 30%, or more, pro forma pretax profit.
Summary
This process of first creating a meaningful pro forma income statement and budget with the management team, and removing expenses the agency will no longer have or really need, is a good exercise to perform each year. The result can then be used to do an estimate of agency value with appropriate compensation for the owners.
Oak is the founder of Oak & Associates, a consulting firm based in Bend, Oregon, and Northern California. Her expertise spans financial and management consulting for independent insurance agencies, including valuations, mergers and acquisitions, sales and marketing planning, and perpetuation planning. Phone: 707-935-6565. Email: catoak@gmail.com.
Idea Exchange: The Marketing Connection
How to Build Trust with Small Business Insurance Clients
Establishing trust with small business clients is key to maintaining their loyalty over time. Insurance professionals can build trust and communicate effectively with smaller enterprises by focusing on personalized service, clear marketing, and understanding their niche needs.
Communicate Clearly
By Anita Nevins
Small businesses often have limited resources, smaller teams, and industryspecific vulnerabilities. Acknowledging these factors shows that you recognize and care about their individual needs. Demonstrate this understanding by tailoring risk assessments to address their challenges, offering insurance solutions that fit their budget constraints, and providing proactive risk management advice relevant to their industry.
Build Relationships
Regular check-ins, personalized advice, and meaningful interaction can transform a mere client relationship into a true partnership. Make it a priority to initiate
frequent, genuine conversations to discuss their concerns, provide updates, and offer proactive recommendations. This ongoing engagement builds credibility and fosters a dependable rapport.
Offer Custom Solutions
A one-size-fits-all approach doesn’t work for small businesses. Crafting insurance policies tailored to their industry and business size showcases your expertise and commitment to meeting their needs. By offering personalized options, you can address their risks more effectively, making your services indispensable to their operational security.
Be Accessible
Availability is crucial. Ensure that your communication channels are always open and easy to use. Small business owners should feel they can reach out anytime with questions or concerns. Consistent availability supports your marketing efforts by demonstrating a commitment to proactive client engagement and personalized service.
Follow Up
After policy purchases or claims
processing, follow up to ensure everything is in order and your clients are satisfied. Promptly addressing any post-transaction issues will strengthen your relationship and assure clients they can depend on you in the long run. Utilizing marketing automation tools for follow-up communications can streamline this process, ensuring timely and personalized interactions that reinforce client satisfaction and loyalty.
Simplify Your Marketing Messages
Effective marketing strategies can simplify communication and build trust with small business insurance clients. Focus on clear messaging and transparency to build stronger relationships and ensure clients feel confident in their insurance decisions.
• Use simple language: Small business owners are not insurance experts. Communicate in simple, straightforward language, avoiding insurance industry jargon that can confuse and alienate them. This clarity ensures they understand their coverage and feel more confident in their decisions.
• Clarify coverage details: Transparency is critical. Clearly outline what is and isn’t covered in their policies. When small business owners know exactly what they are buying, they appreciate the integrity and comprehensiveness of your service.
• Provide examples: Illustrate how different coverages work with real-life scenarios. For instance, explain how a liability policy protects a business if a customer gets injured on the premises. Use examples relevant to their specific industry.
• Offer educational resources: Empower your clients with knowledge. Use guides, FAQs, and webinars to help them understand their insurance options thoroughly. Being a reliable source of information establishes you as an expert in the field.
• Be consistent: Ensure that all forms of client communication convey a clear and uniform message. Inconsistencies can confuse clients and erode the trust you’ve worked to build. Set a standard for communication within your team to maintain reliability and professionalism.
‘A one-size-fits-all approach doesn’t work for small businesses.’
Understand Small Business Needs
Demonstrate your commitment to understanding and meeting the needs of small businesses by conducting thorough assessments, staying informed about industry trends, and offering proactive advice.
• Conduct needs assessments: As a client’s insurance needs evolve, reviewing their business regularly and offering periodic evaluations is crucial to ensure optimal coverage. This will demonstrate your commitment to their ongoing protection and showcase your attentiveness.
• Stay informed: Knowledge is power. Stay updated on trends impacting your clients, such as regulatory changes, emerging risks, or new technologies. Staying ahead in your field ensures you can provide relevant advice they can rely on.
• Offer proactive advice: Don’t wait for clients to approach you with issues. Anticipate potential problems and offer preemptive solutions through your marketing. This proactive approach enhances your credibility and deepens trust.
• Be empathetic: Empathy goes a long way in building relationships. Truly understand their challenges, celebrate their successes, and offer solutions that resonate with their situations. When clients feel you genuinely care, they are more likely to trust your advice and stay loyal.
• Leverage testimonials: Share success stories from similar clients to build credibility. Demonstrating how you’ve successfully helped businesses with comparable needs proves your expertise and reliability. Real-world examples can be more compelling than any pitch.
Building trust with small business insurance clients requires a personalized approach, clear marketing communication, and a deep understanding of their needs.
Remember that trust is built over time. Commit to these practices and watch your client relationships thrive.
Nevins is the founder and co-CEO of Direct Connection Advertising & Marketing. She manages the company and is heavily involved in strategy and planning for the agency’s clients. Website: directconnectionusa.com to learn more.
Closing Quote
5 Things to Know When Buying or Selling an Agency in 2025
By Alicia Chandler
With rapid changes occurring in Washington, it can be challenging to know how they will affect one’s business. Owners of insurance agencies and other businesses may be especially focused on how changes will affect growth opportunities, particularly for mergers and acquisitions.
Here are five ways recent events may influence decisions to buy or sell this year.
1. Declining interest rates.
Interest rates are declining, but not at the rate that was expected several months ago.
In December, members of the Federal Reserve Board (the Fed) predicted overall cuts of 50 basis points. Persistently high inflation, however, makes it less likely that the Fed will drop rates anytime soon.
Cuts in the Federal Funds Rate by the Fed impact the prime rate (which runs about 3% higher than the FFR). When the next cuts come, they won’t hit ordinary retail borrowers right away. Many business lenders use Treasury bond yields as their benchmark for setting interest rates for their loans. The T-bond yield generally moves along with the prime rate, but it is affected by a wide range of economic factors.
Still, current interest rates are lower than they were
through much of 2024. Lower interest rates make deals more attractive and likely will prompt more M&A activity across all sectors.
2. Reduced regulation.
President Donald Trump promised to cut regulations to spur innovation. In the insurance industry, reduced regulation could make operations easier and potentially simplify consolidation of books of businesses post-sale.
Trump also has signaled more lenient antitrust policies, which could promote M&A activity. As the Republican base has become more populist, however, Republican lawmakers may provide pushback against large mergers, especially in the tech industry.
3. Tax considerations.
The Tax Cut and Jobs Act (TCJA), enacted during Trump’s first term, is likely to come back in some form during his second. Most of its provisions either have expired or will sunset by the end of 2026; now it looks as though many will be reinstated or made permanent. Notable provisions likely to be enacted include 100% bonus depreciation for big-ticket purchases by businesses, lower individual
tax rates, and reduced corporate tax rates (possibly as low as 15% for some businesses manufacturing within the United States). Continuing the 20% pass-through deduction for small business owners would benefit many independent agency owners.
Lower taxes for individuals may free up dollars for additional insurance spending, and reduced corporate taxes may fuel business expansions, leading to an uptick in business insurance purchases. These trends may help build organic growth, which is an important factor in making an agency attractive to buyers.
Trump also has indicated a willingness to reduce the capital gains tax rate. Such a move could prompt some tentative sellers to put their agencies on the market, as they anticipate that the tax implications of the sale could be mitigated.
4. Effects of tariffs.
Trump has announced tariffs on goods from China, Canada, and Mexico, and reciprocal tariffs against countries charging fees (such as value-added tax or VAT) for imported U.S. goods. Tariffs could have a negative effect on insurance agency profitability by disrupting supply chains and
raising the cost of materials needed for claims responses. Lowered profitability could put downward pressure on agency valuations, which would affect sale prices.
On the other hand, tariffs may bring an upswing in business insurance, as more companies onshore their manufacturing to avoid tariffs. Expansion of domestic businesses could mean more demand for insurance, pushing agency profits higher.
5. Weather and climate fallout.
The four major hurricanes of 2024, the Los Angeles wildfires, and a multitude of other climate-related events struck the insurance industry hard. As companies regroup and recover, the costs of these weather phenomena will have to be managed. The effects of the losses of 2024 and early 2025 may affect agency profitability and valuation in the years ahead.
Is 2025 a good time for M&A?
Some experts are predicting 2025 will be a strong year for M&A activity. Agency owners thinking about a sale or purchase should weigh the strengths and challenges of any potential deal with a team of experts, including a trusted lender who understands the insurance industry. If the fundamentals of the deal work for all involved, 2025 may be a great time to buy or sell.
Chandler is president of Indianapolis-based Oak Street Funding, a First Financial Bank company, with customized loan products and services for specialty lines of business.
