The failures of some significant financial institutions in 2023 has increased challenges to the sector. The regional bank stress events sharpened fidelity/crime underwriters’ awareness of internal and external controls related to their insured’s risks and their fraud threat environment. This increasing awareness has also trickled into the broader commercial space.

While financial stability and firm resilience remained a focus for underwriters, we also saw an uptick in insurer renewal requests for evidence of robust protection from employee defalcation, forgery, computer crime, funds transfer fraud and social engineering. Raising fraud awareness and clarifying individual employee accountability was seen by underwriters as an effective tool to improve risk profiles. Companies that demonstrated a strengthening of existing prevention and detection capabilities with the implementation of new control processes and technologies to detect and/or prevent fraud were received very positively by the market. The continued dynamics of smart-working models typically requires companies to outline VPN arrangements for employees’ remote system access and detail controls for funds and securities movements initiated by employees.

Pricing stabilized compared to 2022 and we experienced consistency in the underwriting of fidelity/crime programs within the United States, London and Bermuda. We are seeing substantial limits available for all types of coverages within a fidelity/crime program, provided the control environment is viewed positively by the underwriters. By now, most insureds have seen theft of information, destruction of data, reconstruction costs related to the destruction of data, and extortion cover removed from their crime programs, as that is generally viewed by the market as covered by cyber policies. The market has continued to see an increased frequency of social engineering notifications and most significant fidelity/crime losses continue to involve employees.

Regarding kidnap-ransom programs, the availability of comprehensive coverage terms remained prevalent in the market. However, underwriters have significantly limited coverage in Russia, Ukraine and other territories with ongoing conflicts. Pricing is highly dependent upon the analysis of the information presented to underwriters and exposure to high-risk territories generally leads to an upward pressure on rate. Insureds who are coming off three-year deals, that have ramped-up operations, expanded territories and hired employees since the last renewal amid the pandemic, are experiencing pricing changes due to this exposure growth.

We are optimistic heading into 2024 for fidelity/crime products for the financial institution and commercial sectors. There will likely be continued market pressure on rates. However, the availability of viable market alternatives should continue to offer options for insureds.

We are cautiously optimistic about the kidnap-ransom product. Insurers will keep a close eye on territories with continuing conflicts. Capacity is substantial and crisis management firms stand ready to assist with the ever-changing environment.

If you have any questions about or are interested in obtaining coverage, please contact your Aon broker.

All descriptions, summaries or highlights of coverage are for general informational purposes only and do not amend, alter or modify the actual terms or conditions of any insurance policy. Coverage is governed only by the terms and conditions of the relevant policy.