When insurers’ profit margins are thin or under sustained pressure, we are increasingly observing a correlation with more stringent claims handling practices. In these environments, carriers may take more conservative coverage positions, require greater documentation, or extend the time required to resolve claims, which can make the recovery of insurance proceeds more challenging for insureds. In some instances, insurers have taken positions that are technically grounded in policy language but inconsistent with insureds’ expectations regarding how coverage should respond based on historical practices or market norms.

As a result, it is more critical than ever that insureds work closely with their insurance brokers and — where appropriate — coverage counsel to carefully review insurance contracts. Financial institutions and their advisors should specifically focus on policy terms, conditions, exclusions, and definitions that could be broadly or narrowly interpreted in ways that adversely impact claims recovery.

Best outcomes are typically achieved through early and consistent engagement with insurers throughout the claims life cycle and early policy negotiation periods. Providing timely claim notifications, regular status updates on defense costs incurred, and advance communication regarding mediation or settlement discussions helps minimize surprises, promotes transparency, and facilitates more efficient and constructive claims resolution.