Silicon Valley Bank Seized
The Potential Fallout from the 2nd-Largest Bank Failure in U.S. History
March 13, 2023
By now you’ve likely heard of the Silicon Valley Bank (SVB) crisis. The bank’s assets were quickly depleted late last week with customers withdrawing over 42 billion US dollars on Thursday. As of late last week, the bank had over a billion dollars in negative cash balances. At the end of 2022, SVB had over 151 billion dollars in uninsured assets (The FDIC covers up to 250k of customer deposits). Over 137 billion dollars of the uninsured funds were held by American Customers. According to the Wall Street Journal, SVB is the largest bank failure since 2008.
The 2008 financial crisis had an adverse impact on the management liability insurance market.
During the crisis, there was a steady increase in litigation and regulatory investigations against executives and directors of financial institutions. This led to an increased focus on risk management corporate governance and improved corporate stewardship. The financial crisis created volatility in the market, creating a higher demand for management liability insurance. This increased demand, which increased insurance rates and retentions, and resulted in stricter underwriting. Insurers became increasingly more cautious at this time and tightened their endorsements and increased their exclusions.
We’ve spoken with multiple carrier partners over the past weekend. Many of our carrier partners do not anticipate any changes to their appetite at this time; however, the market will be in a constant state of flux during the SVB fallout. Carriers are closely monitoring the developments and will pivot their strategies accordingly during this difficult financial time.
We anticipate it becoming harder for first time buyers to find coverage similar to the market conditions we saw in the first 12 months of the Covid-19 epidemic. It is important to have a conversation with your broker on every important management liability renewal. Founders Professional is your management liability expert. We are here to help you and your clients get through the difficult and easy insurance renewals. Please reach out to us to discuss the changes in the market. We are proud to help.
About the Author
Kevin Merchant focuses daily on assisting retail insurance agents find solutions for their hard-to-place professional liability, management liability and cyber liability insurance risks. Kevin is based out of Tampa, FL and can be reached directly at [email protected].