Insurers are responding to rising regulatory attention not by changing their policies outright but by being more careful in how they assess each client. Instead of blanket adjustments to coverage, underwriters are focusing more on the details of individual firms, including their leadership, investment approaches, and customer bases.
Jessica Thayer, senior vice president and financial services practice leader at Starkweather & Shepley Insurance, explains that policies themselves are generally expanding rather than narrowing. The real shift is in underwriting, with each risk looked at closely on a case-by-case basis. This approach helps insurers avoid knee-jerk reactions to media headlines or expected broad crackdowns. Since the last big regulatory shake-up during the financial crisis, there hasn’t been a sweeping change in how insurers handle coverage.
Particular caution arises around certain types of investments. Private funds and digital assets, like cryptocurrencies, draw extra scrutiny. Underwriters prefer regulated and predictable areas. When firms deal with private funds or digital currency, insurers become hesitant. In some cases, those with crypto exposure may not even get quotes. Rates reflect these concerns — regulated products tend to get better pricing, while firms involved with private placements or alternative investments often face higher premiums or difficulty obtaining coverage at all.
The type of clients a firm serves also carries weight. Large pension funds, for example, are seen as higher risk for lawsuits compared to wealthy individual investors. Some insurers will cover higher-risk clients but often with steeper deductibles.
Cyber insurance, meanwhile, looks different. While professional liability policies remain mostly the same, cyber policies have broadened over time due to more competition. Yet, insurers demand strong security measures, like multi-factor authentication and endpoint detection, as a baseline for coverage. They’re more concerned about ransomware attacks, where hackers infiltrate systems, learn behaviors, and then demand ransom to restore operations. Unlike early days, many insurers now cover cyber extortion, though some put limits on payouts, which firms should review carefully when planning their response strategies.
Mergers and acquisitions in wealth management add new challenges. Buying firms usually purchase tail coverage to protect against claims that surface after a sale. Ideally, the original insurer provides this tail coverage for continuity, but sometimes it’s too expensive or restricted, forcing firms to turn elsewhere. Coverage for legacy liabilities under the acquiring company’s policy remains rare, so getting proper tail coverage is critical.
Reputation risk is another area insurers watch closely. Clients may want to fight claims they see as unfair, while insurers often prefer settling quickly. Picking an insurer that supports a firm through claims helps protect reputations during disputes.
As financial firms grow and adopt more digital tools, insurers are paying closer attention. However, rather than tightening policies across the board, they’re widening coverage while carefully choosing clients. This method lets them pursue more business while keeping risks manageable.
Overall, insurers are sharpening their focus on who they cover and how, rather than rewriting policies wholesale. In a sector marked by change, this tailored approach aims for balance between opportunity and caution.