Midway through 2026, the nonprofit sector is navigating one of its most complex operating environments in recent memory. Federal funding disruptions, intensifying political scrutiny, continued cyber threats, and evolving insurance market dynamics have created new challenges for boards, executives, and risk managers alike.
Summary
The nonprofit landscape in 2026 has been defined by a divide between organizations with diversified revenue streams and those with greater dependence on a limited number of funding sources. Larger nonprofits with strong governance structures and multiple sources of support have generally demonstrated greater resilience, while smaller and mid-sized organizations face heightened financial uncertainty.
Federal funding disruptions tied to the Department of Government Efficiency (DOGE), which operated through November 2025 before its scheduled sunset, resulted in an estimated $49 billion in grant terminations, with approximately one-third of nonprofits reporting they have lost or are at risk of losing federal funding.1 For many organizations, these developments represent more than a temporary challenge and may require meaningful adjustments to long-term operating models.
Economic uncertainty, inflationary cost pressures, and growing demand for community services add complexity, even for otherwise healthy organizations. Merger and consolidation activity is also increasing as nonprofit leaders evaluate financial sustainability alongside mission preservation. Scenario-based planning, strong operating reserves, and documented governance decisions are important indicators of organizational resilience for funders, stakeholders, and insurers alike.
Understanding these shifts and their insurance implications is essential for nonprofit leaders committed to protecting their missions and the communities they serve. In this environment, disciplined governance, proactive risk management, and thoughtful program structure remain essential. The Baldwin Group helps nonprofit organizations evaluate emerging risks, strengthen organizational resilience, and align insurance strategies with evolving operational and funding realities.
Current trends
While many organizations demonstrated remarkable adaptability in 2025, several of the pressures emerging in 2026 appear more structural than cyclical, requiring leaders to reassess both operational and risk-management strategies.
Nonprofit management liability
Directors and Officers (D&O) liability has emerged as one of the most consequential coverage areas for nonprofits in 2026. Boards face a dual challenge: financial stress on one hand and heightened regulatory and stakeholder scrutiny on the other. Federal funding cuts and DOGE-related disruptions have introduced new D&O exposures, prompting insurers, particularly for organizations in health, housing, and social services, to closely evaluate federal funding reliance and contingency planning.
- D&O claim trends – Insurers are increasingly focused on claims arising from operational decisions made in response to funding gaps, alleged mismanagement of restricted grants, and whistleblower activity related to workforce reductions.
- D&O market conditions – Market conditions remain broadly favorable for buyers. The D&O marketplace continues to feature abundant capacity, and flat or low single-digit renewals have become the norm for well-governed organizations.
- D&O underwriting trends – Financially stressed organizations face heightened scrutiny, with some insurers introducing insolvency-related exclusions and applying greater pressure to excess layer pricing.
- Governance and oversight – Clear decision-making authority, documented board deliberations, and regular board-level engagement on risk continue to be important indicators of organizational resilience and favorable underwriting outcomes.
- EPL market conditions – The Employment Practices Liability (EPL) market remains active and complex. Claim frequency related to wrongful termination, wage-and-hour disputes, harassment, and discrimination is driving underwriting scrutiny.
- EPL claims trends – Nonprofits managing workforce reductions in response to budget pressures face heightened exposure, as displaced employees may challenge the circumstances surrounding their departures.
- EPL retention trends – Retentions continue to rise, particularly in high-litigation states such as California, New York, and Illinois. Thoroughly documented HR practices, current employment policies, and manager training remain important risk-management considerations.
As management liability exposures continue to evolve, strong governance, financial stewardship, and disciplined employment practices remain important differentiators. The Baldwin Group’s nonprofit specialists work with boards and finance committees to navigate these underwriting conversations, communicate organizational resilience effectively to insurers, and position nonprofits for favorable renewal outcomes.
Cyber liability
After a period of meaningful stabilization, the cyber insurance market is signaling a shift. Following rate decreases that averaged approximately 3% in late 2025, the market is now moving toward flat or modestly increasing rates through 2026 as several prominent insurers refocus on book stability. More importantly, the underlying threat environment has grown considerably more dangerous, with threat actors deploying increasingly sophisticated tactics that challenge traditional cybersecurity controls.
- Ransomware – Ransomware payments surged dramatically in mid-2025, with average ransom demands exceeding $1.1 million and the median payment doubling to $400,0002.
- Social engineering – Social engineering attacks have become more sophisticated through the use of AI-generated deepfakes and voice cloning, enabling fraudsters to impersonate executives and manipulate employees into transferring funds or disclosing credentials.
- New attack vectors – A newer attack vector known as “ClickFix” tricks users into manually executing malicious commands, bypassing traditional defenses. Only about a quarter of organizations that pay ransoms report full data recovery, underscoring that payment is not a reliable resolution strategy.
- Nonprofit exposure – These threats are particularly acute for nonprofits. High-trust organizational cultures, frequent handling of sensitive donor data, and resource constraints that limit cybersecurity investment make the sector an attractive target.
- Cyber hygiene – Insurers continue to require robust cybersecurity controls, including multi-factor authentication, endpoint detection and response, and regular employee training. Organizations that cannot demonstrate these controls may face restricted terms or limited coverage options.
Robust cybersecurity controls, employee awareness, and incident response preparedness remain important differentiators as insurers evaluate cyber risk and organizations navigate an increasingly complex threat environment. The Baldwin Group’s Cyber Center of Excellence provides nonprofits with the advisory support, resources, and tools to strengthen their cyber posture and navigate evolving insurer requirements.
Property insurance
The property insurance market is showing some welcome signs of moderation in 2026, with rate increases decelerating from the double-digit levels that characterized recent years. While market conditions continue to improve, challenges remain for organizations with catastrophe-exposed properties or deferred maintenance concerns.
- Market conditions – Increased competition and moderating rate trends are creating a more favorable environment for many nonprofit organizations, particularly those with well-maintained properties and favorable loss histories.
- Catastrophe exposure – Wildfires in the western United States, severe convective storms across the Midwest and Southeast, and hurricane activity continue to exert upward pressure on reinsurance costs which flow through primary pricing, particularly in catastrophe-prone regions.
- Deferred maintenance – Nonprofits that own their headquarters or program facilities face a specific operational risk that has gained insurer attention: deferred maintenance. As organizations reduce costs in response to funding pressures, building upkeep is frequently among the first expenditures curtailed, prompting increased underwriting scrutiny of property conditions.
- Property condition scrutiny – Insurers have sharpened scrutiny of property conditions, making maintenance protocols, inspection records, and documented capital improvement plans increasingly important indicators of risk quality. Organizations that cannot demonstrate adequate upkeep may face higher retentions, sublimits, or restricted terms.
Proactive property maintenance, documented facility management practices, and long-term capital planning remain important differentiators as insurers evaluate property risk and organizations navigate evolving market conditions.
Turn insight into action
The second half of 2026 will test the resilience of nonprofit organizations across multiple dimensions of their risk profile. Funding instability, workforce challenges, an evolving cyber threat landscape, and heightened management liability exposures have converged in ways that demand a coordinated and proactive approach to risk management. The insurance marketplace, while broadly competitive, is tightening at the margins, particularly for organizations that cannot demonstrate sound governance, financial planning, and operational controls.
Nonprofit leaders are increasingly challenged to balance mission delivery with financial sustainability, regulatory compliance, and organizational resilience. Navigating this environment requires more than securing coverage at renewal. It requires thoughtful planning, disciplined governance, and risk-management strategies that evolve alongside changing operational realities.
The Baldwin Group’s dedicated nonprofit practice supports organizations across a wide range of missions and service models. Acting as an extension of your team, our advisors help evaluate emerging risks, strengthen organizational resilience, identify coverage gaps, and align insurance strategies with evolving operational, funding, and governance challenges.
This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. The Baldwin Insurance Group Holdings, LLC (“The Baldwin Group”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. The Baldwin Group does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, The Baldwin Group does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.
