A Hardening Insurance Market for Non-Profits-Steps to Prepare for the 2025 Renewal Process

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

Non-profit and human services leaders started experiencing a hardening property and casualty insurance market in 2024 illustrated by reduced limits of liability, higher deductibles, and increased premiums. And, the market shift still may not have been enough to right the ship.

According to Insurancebusinessmag.com, reinsurers are seeking double digit increases in 2025 due to rising claim costs. Behind these rising claims costs are social inflation, emerging risks (i.e., opioid and synthetic chemicals), reserve increases, litigation funding and no promising tort reform. Reinsurers also argue that 2024 rate hikes were insufficient. As a result, these companies are reducing exposure to the US casualty market.

When reinsurers sneeze, the insurance market and its insurers catch a cold. In 2025, expect more signs of the hardening market. However, there are steps non-profit leaders can do to prepare for the renewal process in 2025.

Anticipate Premium Increases

Consider the organization’s growth in all rating factors, whether it be revenue, employee count, vehicles, or beds. Premium will increase accordingly before rate increases.

Complete Full Insurance Applications

An experienced insurance agent will ask clients to update applications in hard copy, using electronic documents, or via an online portal. If this is not happening, ask why. If it is happening, then complete the full version rather than truncated renewal applications. Creating competition in the marketplace means providing underwriters a full scope and understanding of operations. Very few underwriters will quote using another carrier’s renewal updates.

Review Contract Insurance Requirements

Many carriers are reducing limits of liability for abuse/molestation and professional liability. Others will no longer quote umbrella or excess liability. Stacking quotes from various carriers to achieve once readily attainable limits is possible, but this strategy comes with a significant premium cost. So, before stacking policies, review contracts with counties, regional centers, and funders to understand the required insurance coverage.

Engage with Partners Now

Communicate to organization partners the cost to maintain required insurance limits. Take a hard look at current programs to determine if outcomes (i.e., revenue and impact) warrant the increased insurance costs. Some programs may need to sunset.

A continuing hardening insurance market in 2025 will force non-profit and human services leaders to approach the renewal process with care and new focus. The recommended steps listed above will help organization leaders develop a renewal strategy while helping underwriters’ analysis prior to releasing quotes.

For more information about the hardening market, contact me at sbrown@ranchomesa.com or (619) 937-0175.

Protecting Non-Profit Operations with Business Interruption Insurance

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

A non-profit organization’s culture and positive impact often flows through its strategically placed locations in the communities it serves. These locations, whether they be offices, group homes, childcare centers, or shelters all further the mission and may drive revenue. The cost to the organization if one of these locations becomes inoperable due to a property damage claim can often add undue stress to the finances and leadership. This article will address how business interruption insurance (BII) can address these costs.

Following a covered property loss, a business or non-profit organization may suspend a location’s operations while repairs are made. This is known as the period of restoration. If such a suspension occurs, operations may be impacted in several ways.

 First, revenues may decline. Examples include a health clinic treating a reduced number of patients, a Boys & Girls Club losing members and monthly dues, or donations decrease.

Second, at the risk of losing staff, the organization may need to keep key employees on the payroll who cannot work their shifts during the repairs.

Third, the organization may continue to incur fixed costs at the location such as mortgage, rent, insurance, taxes, professional services and utilities.

Lastly, the non-profit may incur extra expenses to maintain operations or services at an alternative location. These extra expenses may include the cost of an extended stay hotel for clients or increased rent for an alternative worksite, and the cost of moving expenses.

The Challenge

How does a non-profit leader arrive at the most appropriate limit of insurance to indemnify the organization during a loss?

A Best Practice approach would involve the, use of a business interruption worksheet. This document will guide a policyholder and its insurance broker by asking for different line items to be insured.

These items will include:

• Annual net income

• Annual compensation for key people to be retained during the suspension of operations

• Annual employee benefits, pension costs and payroll taxes for key people

• Continuing fixed expenses

• Extra expense

The sum of these figures will provide the limit needed for a 12-month period of restoration. If 12 months does not seem long enough, then the policyholder and broker should discuss a realistic length of time operations would be suspended following severe property damage.

If operations may not resume in full capacity following completion of the repairs, then the policyholder and insurance broker should consider an extended period of restoration.  This may allow a business 180 to 365 days of extended coverage once the period of restoration ends.

Business interruption insurance coverage continues to confuse employers and many insurance brokers who do not have experience working with non-profit organizations. Rancho Mesa encourages decision makers to discuss this coverage and possible disaster plans at length with their insurance broker. It may help avoid a costly financial loss following property damage.

For more information or to ask questions about business interruption coverage, please contact me at sbrown@ranchomesa.com or (619) 937-0175.