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As Insurance Companies Respond To An Unprecedented Market Stress, What Does This Mean For Your Church?

The landscape of Texas church insurance is currently fraught with instability, characterized by a distressing trend of premium increases, deductible increases and policy non-renewals.  Churches across Texas are finding themselves in a precarious position as the insurance business continues to tighten within the church insurance segment.  Many of you have already experienced the current unpleasantness of the marketplace and if you haven’t yet, hang on because it’s likely coming.

What Are The Factors Contributing To This Trend?

  • An unprecedented rise in natural disasters. According to the National Oceanic and Atmospheric Administration, in 2023, the U.S. experienced a record breaking 28 billion-dollar plus disasters, causing an estimated total of $92.9 billion in damages (with 6 of these occurring in Texas).  This was the fourth consecutive year there have been 18 or more separate billion-dollar disasters, creating a consistent pattern of large catastrophic weather events becoming the new normal.
  • Building costs have surged. While prices have fallen back from their highs in 2021/2022, price levels remain above the long-term average.  And with an increase in storm activity, these higher building costs have had a major impact on insurance carriers.
  • Liability trends. As churches are held to a higher standard of care, liability verdicts continue to mount as sympathetic juries drive large judgements. These can take on several forms but often include sexual abuse within the church (let’s not forget the Boy Scout scandal which is not over with yet), personal injuries involving slips and falls, playground equipment and others and of course vehicle accidents. 
  • Financial Loss. Recent figures from AM Best US Property/Casualty industry reported a $26.5 billion net underwriting loss in 2022.  Compare this to a $4.1 billion net underwriting loss in 2021. Through the end of 2023, three of the four more widely known church insurance carriers have a 5-year combined loss ratio exceeding 100% (meaning they are paying out more than they are bringing in).  Their 5-year net income averages a negative $86 million dollars.
  • Carrier Withdrawal – Church Mutual, one of if not the largest insurer of churches nationwide, is said to have dropped over 1,000 churches just in Texas and that number may grow. In an already tightening marketplace, this has been near disastrous and those being dropped are seeing significant changes in premium, policy terms and deductibles due to a saturated and ever tightening marketplace.
  • Cost of Reinsurance – Reinsurance is simply put, insurance for insurance companies. But the amount of coverage is capped so when the number of catastrophes increases and the cost of construction goes up, insurance companies have to pay more out of their operating surplus.  And the more the reinsurance is tapped, the higher the reinsurance costs are, in many cases being up over 40% in 2023, and those higher cost trickle into the marketplace. 

As A Result, How Will This Affect My Church?

No carrier is immune to these issues, and they are all having to choose a sustainable path, or they will face financial downgrades or worse.  Generally, they are doing this in several different ways.

  • Renewal Premium Increases – Increases have to some degree trended over the last several years and this will continue for 2024. While many factors can affect the actual increase amount, averages seem to currently be in the 20% range.  Those numbers could be even greater if significant property value changes are applied.
  • Wind/Hail Deductible Increases – Just three to four years ago, it was unusual to have a percentage wind/hail deductible and if you did, 1% was pretty much the norm. Today, we are seeing a trend to 2%, 3% and even 5% deductibles for a wind and/or hail loss, especially in the Gulf Coast region and some major metropolitan areas.  
  • Increased Property Values – With the recent rise in building costs, insurance carriers have taken a serious stance on structures being insured to full replacement value. In many cases, even with inflationary increases applied over the years, the insured cost per square foot has not caught up to the rise in building costs so expect to see those values increase.  Some could be significant increases depending on current cost per square foot valuations. 
  • Cancellations – As previously noted, some insurance carriers like Church Mutual are cancelling large groups of business in order to reduce their capacity in “coastal” area or areas deemed a higher risk (more wind and/or hail prone areas, more rural areas, etc.).

What More Do I Need To Know?

  • There Will Be An End – While we have not previously seen anything like what we are experiencing now, it likely has an end date. Of course, to some degree that’s dependent on our weather cycle but it’s the opinion of some we will see rates leveling off in the next two years, possibly at the start of 2026.
  • Continue Your Commitment to Safety and Risk Management: More than ever before, pay careful attention to mitigating any future property or liability losses.  This may include:
    • Develop and adhere to strict sexual abuse safeguards for both children and teens. Advanced training with programs like Ministry Safe or the Evangelical Council for Abuse Prevention are excellent resources.
    • Implement and adhere to strict transportation guidelines whether that involves church-owned vehicles or those driving on your behalf.
    • Have your metal roofs inspected and maintained. Metal roofs require periodic maintenance and without it, they have a tendency to develop leaks (which are typically not covered by your insurance).
    • Protect your A/C units against theft.
    • Utilize water sensors. In some cases, your insurance provider might provide these free of charge.
    • Involve those in your community. Have the police and fire department look at your building and ask for their recommendations.
    • Conduct scenario planning. Play the what if game to see how prepared you are……(medical emergency, disruptive adult or teen, press on-site due to something that happened at your church, shooter on the premises, etc.)
    • Plan ahead for your Special Events. Check with your insurance agent on your planned activities for coverage verification or the possible need for a Special Events policy.
    • Transfer risk. If you have others using your property, you need to take the proper steps to transfer that risk to their insurance, not yours.
  • Understand That Churches Are Typically Not A Preferred Insurance Market – As much as we’d prefer otherwise, many insurance companies are not favorable to insuring churches. Their risks are unique, their budgets can be limited, often their buildings are aged, and by their very nature, they are an open door.  All these things limit the number of companies willing to insure churches so we have to be proactive in reducing claims.  But we also believe that if you take the steps mentioned above, you can remain a viable risk that an insurance company would love to insure.
  • Have A Trusted Partner – You need protection from people who understand churches. Work with an agent who knows how to “navigate the storm” as best they can.  More than ever before, it is important to have an agent who understands churches and the unique risks they face daily and who has a relationship with markets who write church insurance.

We understand that’s a lot to take in.  But we’ll get through this – together – as we work with you in protecting your ministry.