2026 Financial Institutions industry mid-year state of the market

The financial institutions insurance market has remained stable through mid-2026, with most organizations continuing to benefit from flat renewals, ample capacity, and consistent underwriting conditions. While select accounts may experience adjustments based on their risk profile, claims history, or business model, broad market disruption has largely been absent.

Overview

Concerns stemming from the 2023 banking crisis have largely receded, with only two small bank failures reported in 2025, reinforcing the sector’s overall stability. Retentions, premiums, and limit requirements remain driven primarily by an organization’s industry segment, operational profile, and loss experience, not broader market conditions.

Defense costs remain a notable area of concern as litigation expenses continue rising. For complex matters, defense counsel rates exceeding $1,000 to $2,000 per hour are becoming common, contributing to higher claim severity across many financial lines coverages. Consistent with historical trends, professional liability (errors and omissions) claims continue to generate some of the most significant losses across the sector.

While underwriting appetite remains more selective for certain higher-hazard segments, including digital assets, non-bank lending, mortgage servicing, investment banking, and select professional liability classes, the overall marketplace remains healthy, with ample capacity available across most coverage lines.

Rising defense costs, evolving liability exposures, and changing regulatory expectations reinforce the importance of disciplined risk management. The Baldwin Group helps financial institutions evaluate emerging risks, strengthen program structure, and align insurance strategies with their business objectives.

Current trends

Commercial and community banks

The insurance market for commercial and community banks remains stable, with most institutions benefiting from flat renewals, ample capacity, and consistent underwriting conditions. Banking continues to be viewed favorably by insurers, supported by a relatively stable operating environment and the absence of the broader sector concerns that followed the 2023 banking crisis.

While market conditions remain favorable overall, underwriting scrutiny has become increasingly concentrated in specific areas of credit, regulatory, and operational risk as insurers seek to differentiate risks and evaluate potential sources of future loss.

• Private credit exposure – As private credit markets continue expanding, underwriters are increasingly evaluating direct and indirect exposure, particularly where liquidity, concentration, or valuation concerns may emerge.
• Commercial real estate – Commercial real estate portfolios remain a focus, with particular scrutiny on office concentrations, loan performance, refinancing risk, and borrower stress.
• Digital assets – Cryptocurrency and digital asset-related activities continue to attract heightened underwriting attention due to evolving regulatory frameworks, operational complexity, and litigation concerns.
• AML and compliance controls – Anti-money laundering controls, compliance frameworks, and governance practices remain critical underwriting considerations amid continued regulatory focus.
• Government-backed lending – Participation in PPP, FHA, and other government-backed lending programs continues to receive scrutiny as regulators pursue enforcement actions and False Claims Act investigations.
• Regulatory activity and litigation – Recent or ongoing regulatory investigations, enforcement actions, and litigation history remain important indicators of underwriting risk.

Banks that can demonstrate strong risk management practices, disciplined underwriting standards, and effective compliance controls in these areas are generally positioned to achieve the most favorable renewal outcomes.

Investment banking

The insurance market for investment banks remains more challenging than for commercial banks, with a smaller group of insurers willing to offer competitive primary coverage solutions. Underwriting appetite continues to vary significantly across the sector, reflecting differences in service offerings, transaction profiles, professional liability exposure, governance practices, and overall risk profile.

• Service offerings – Certain advisory activities continue to attract greater underwriting scrutiny than others. IPO underwriting, debt and equity offerings, private placements, ESOP valuations, and fairness opinions are generally viewed as carrying greater professional liability exposure than traditional M&A advisory work.
• Transaction size and complexity – Larger and more complex transactions typically attract greater underwriting scrutiny due to their increased claims potential. Boutique firms focused on middle-market transactions often benefit from broader market participation and more favorable terms.
• Experience and leadership – Underwriters continue to evaluate the experience, tenure, and track record of investment banking professionals, particularly within leadership and deal execution teams.
• Conflicts of interest – Conflict-management procedures, engagement protocols, and governance controls remain important considerations given the potential for disputes arising from advisory activities.
• Partner and ownership disputes – Partner departures, succession issues, and internal disputes can create management liability concerns that influence underwriting assessments.
• Regulatory and litigation history – Regulatory investigations, enforcement actions, and prior litigation continue to be important indicators of risk quality and underwriting appetite.

Firms that maintain strong internal controls, clearly defined engagement processes, and experienced leadership teams are often best positioned to navigate underwriting scrutiny and secure favorable renewal outcomes.

Non-bank lending, financial technology companies, and digital asset companies

The insurance marketplace for non-bank lenders, FinTech companies, and digital asset organizations remains challenging, with a relatively small number of insurers actively pursuing these risks. Market capacity is particularly constrained for professional liability (errors and omissions) coverage, which is often the most difficult line of coverage to secure. Other management liability and corporate insurance coverages are generally more accessible, although underwriting scrutiny remains elevated.

Underwriting appetite varies significantly across the segment, with digital asset and cryptocurrency-related organizations continuing to face the most restrictive market conditions. Regulatory uncertainty, evolving compliance requirements, and governance practices continue to play an outsized role in underwriting decisions across the segment.

• Financial performance and capitalization – Profitability, liquidity, capitalization levels, and access to funding remain foundational underwriting considerations across the sector.
• Digital asset activities – Cryptocurrency-related operations, tokenized products, custody services, and other digital asset exposures continue to attract heightened scrutiny due to evolving regulatory requirements, operational complexity, and litigation concerns.
• Regulatory activity – Investigations, enforcement actions, litigation history, and broader regulatory developments remain important indicators of underwriting risk.
• Government-backed lending – Participation in PPP and other government-backed lending programs continues to receive attention as enforcement activity and False Claims Act exposure remain active concerns.
• Portfolio composition – Consumer lending portfolios generally attract greater scrutiny than commercial lending portfolios, with underwriters focusing on concentrations, underwriting discipline, and overall portfolio risk.
• Portfolio performance – Delinquency rates, charge-off trends, and overall credit performance remain important indicators of portfolio health.
• Governance and complaint management – Ownership structure, governance practices, and customer complaint management procedures remain important considerations as insurers evaluate operational controls and regulatory readiness.

Despite limited market appetite, The Baldwin Group has successfully secured comprehensive insurance solutions across all coverage lines, including professional liability, for a broad range of non-bank lenders and FinTech organizations. Organizations that demonstrate strong financial performance, disciplined lending practices, effective compliance frameworks, and robust governance controls are generally best positioned to attract insurer interest and secure favorable underwriting outcomes.

Asset management and investment advisors

The insurance market for investment advisors and asset managers remains highly competitive, with numerous insurers actively seeking to expand their portfolios within this sector. As a result, firms often benefit from broad market participation, competitive pricing, favorable retention structures, and opportunities for meaningful coverage enhancements.

While overall market conditions remain favorable, underwriters continue to evaluate a range of business, operational, and regulatory factors. Regulatory investigations and enforcement actions remain among the most significant sources of loss across the segment, alongside cost-of-correction claims stemming from operational errors, administrative issues, and investment management activities.

• ESG strategies and disclosures – ESG-related marketing practices, fund positioning, and investor communications continue to receive scrutiny as litigation and regulatory activity evolve.
• Regulatory activity – Regulatory examinations, investigations, enforcement actions, and compliance history remain important indicators of underwriting risk.
• Investor profile – Minimum investment thresholds, investor demographics, and client sophistication influence underwriting assessments and claims expectations.
• Digital asset exposure – Investments involving digital assets, cryptocurrency-related products, and emerging technologies continue to attract heightened attention from insurers.
• Industry consolidation – M&A activity remains a focus as continued consolidation across the sector introduces integration, governance, and operational risks.
• Investment strategy – Portfolio management philosophy, investment concentration, and overall strategy remain important underwriting considerations.
• Private market investments – Venture capital, private equity, and other direct private investment strategies typically receive greater scrutiny due to their complexity and risk profile.
• Fund structures – Fund-of-funds arrangements and other complex investment structures continue to influence underwriting evaluations.
• Compensation models – Fee structures, incentive arrangements, and alignment of interests remain relevant considerations in assessing risk.
• Capital flows – Net inflows and outflows across managed funds may provide insight into business performance, investor sentiment, and operational stability.

As insurers continue to differentiate risks within a competitive market, effective compliance frameworks, transparent investor communications, and disciplined investment practices can help firms maintain strong insurer relationships and capitalize on favorable market conditions.

Insurance companies

The market remains stable overall, though underwriting appetite varies by business mix and product offering. Property and casualty insurers continue to face scrutiny around claims handling practices, bad faith litigation, and catastrophe-related exposures, while life and retirement insurers remain more susceptible to advertising, disclosure, and sales-practice allegations.

Although market conditions remain generally favorable, underwriters continue to evaluate operational structure, claims management practices, financial strength, and exposure concentrations that may influence future loss activity.

• Catastrophe exposure – California wildfire activity and broader catastrophe-related exposures continue to influence underwriting evaluations, particularly for organizations with significant geographic concentration.
• Claims operations – Claims staffing levels, organizational structure, and resource allocation remain important considerations as insurers manage litigation and bad faith exposure.
• Third-party administrator (TPA) oversight – Claims handling authority, delegation practices, and governance surrounding TPAs continue to face heightened scrutiny.
• Product complexity – The breadth and complexity of insurance products offered can influence underwriting assessments, particularly where products introduce heightened regulatory or litigation exposure.
• Commercial auto concentration – Geographic concentrations of commercial auto business, particularly in higher-risk jurisdictions, remain an area of focus.
• Marketing and disclosures – Marketing practices, sales materials, and disclosure frameworks related to life and retirement products continue to receive attention from both regulators and insurers.
• Financial performance and capital adequacy – Profitability, reserve strength, and overall capitalization remain foundational underwriting considerations.

Disciplined claims management, effective oversight of third-party administrators, and strong operational governance remain important differentiators as insurers evaluate risk across the sector.

Broker-dealers and securities exchanges

The insurance market for broker-dealers and securities exchanges remains constrained, with a limited pool of insurers willing to deploy meaningful capacity. Coverage is often heavily manuscripted to address the specialized professional, regulatory, and operational exposures associated with these organizations. For securities exchanges in particular, technology-related errors, system performance issues, and operational disruptions remain central risk considerations.

Regulatory oversight, cybersecurity hygiene, and operational resilience continue to shape underwriting decisions across the segment.

• Technology security – As financial markets become increasingly dependent on interconnected technology platforms, underwriters are placing greater emphasis on cybersecurity controls, platform resilience, system availability, technology governance, and the ability to prevent or respond to operational failures that could affect clients, counterparties, or market participants.
• Regulatory activity – Regulatory investigations, enforcement actions, litigation history, and broader compliance trends continue to influence underwriting appetite and pricing.
• Regulatory examinations – Recent examination findings, remediation efforts, and demonstrated responsiveness to regulatory concerns remain important indicators of risk quality.
• Operational risk events – Trading errors, processing failures, settlement issues, and other operational disruptions continue to receive heightened scrutiny due to their potential financial and reputational impact.
• Supervisory controls – Failure-to-supervise allegations, internal control frameworks, and oversight practices remain central considerations as insurers evaluate governance and compliance effectiveness.

Organizations that maintain strong governance practices, resilient technology infrastructure, and disciplined supervisory controls are generally best positioned to secure broader insurer interest and more favorable coverage outcomes.

Emerging issues and market developments

A number of developing trends are shaping the current risk landscape for financial institutions, from credit market pressures and regulatory scrutiny to digital asset adoption and evolving litigation risks. These developments continue to influence underwriting discussions and exposure assessments across the sector.

Private credit market risk

Concerns in the private credit market have drawn significant attention amid recent high-profile defaults and reports of redemption constraints at several large funds, including Blackstone, BlackRock, Apollo, Blue Owl, and Ares Management. Insurers are monitoring whether these developments signal a broader macroeconomic issue, since the asset class remains an important source of capital and investment activity across the financial sector.

Underwriters are focused on exposure within Business Development Companies (BDCs), banks, insurance companies, and asset managers, particularly around private credit allocations, concentration risk, and liquidity dynamics. While the sector remains under heightened scrutiny, insurers are deploying capacity where exposures are well understood, governance practices are strong, and risk profiles are appropriately structured.

Government-backed lending exposure: PPP and FHA loans

Banks and non-bank lenders face heightened scrutiny regarding underwriting practices for government-backed loan programs. Recent PPP-related settlements and ongoing Department of Justice investigations underscore continued regulatory focus on lender compliance, documentation, and underwriting standards.

With regulators maintaining an active enforcement posture under the False Claims Act, participation in government-backed lending programs remains a persistent area of exposure for financial institutions. Underwriters continue to monitor these developments closely, particularly for organizations with significant PPP, FHA, or other government-backed lending activity.

Digital asset expansion

As digital assets become increasingly integrated into mainstream financial systems, associated litigation, regulatory, and crime-related exposures are expected to grow. Recent announcements by major banks, including JPMorgan, Bank of America, and Citi, regarding a shared tokenized network highlight the accelerating pace of institutional adoption and continued evolution of the digital asset ecosystem.

Institutional adoption is also driving greater underwriting scrutiny of governance frameworks, operational controls, custody arrangements, and regulatory compliance. Insurance programs should be reviewed regularly to ensure coverage remains aligned with evolving digital asset exposures and a rapidly changing regulatory landscape.

Anti-money laundering (AML) and aiding and abetting litigation

AML enforcement remains a key regulatory priority, with banks and investment advisors continuing to face investigations and enforcement actions. Recent policy discussions, including proposed updates to Bank Secrecy Act requirements, suggest continued expansion of compliance expectations and regulatory oversight.

Forthcoming requirements for wealth managers and investment advisors to maintain formal AML programs by 2028 further reinforce the likelihood of sustained scrutiny in this area. At the same time, aiding and abetting claims continue to draw attention, creating additional liability considerations for organizations involved in complex financial transactions, client relationships, and fund flows.

ESG concerns

ESG-related claims continue to evolve, with recent cases reflecting exposure from multiple directions. Early litigation largely focused on allegations of “greenwashing,” while more recent actions have challenged organizations for prioritizing ESG considerations over shareholder returns or fiduciary obligations.

This dual-sided exposure continues to create complexity for investment advisors and asset managers, particularly those offering ESG-focused products or strategies. As regulatory expectations, disclosure requirements, and investor scrutiny evolve, underwriters are expected to maintain close attention on marketing materials, fund disclosures, and communications regarding ESG-related objectives and performance.

Turn insight into action

As financial institutions navigate evolving regulatory expectations, emerging liability exposures, and heightened risk complexity, a strategic advisory partnership is essential. Backed by more than 50 years of combined financial institutions experience, The Baldwin Group supports organizations with programs tailored to their business models, governance structures, and operational realities. Acting as an extension of your team, we help identify coverage gaps, strengthen risk-management strategies, and design insurance solutions that support resilience and enhance insurability in an evolving risk landscape.