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Welcome to the Pride,

Welcome to the LION Specialty newsletter. Each week, we scan 200+ insurance industry news events that matter most to financial institutions. We write this newsletter so that you don't have to.

In this week's issue:

• Understanding the Power of LION's Bespoke Lloyd's Program
• Bermuda Flexes Its Muscles: What Robust Growth Means for FI Buyers
• States Get Creative to Keep Insurance Markets Afloat Amid Climate Risks
• Wildfire Resilience Lessons from a Colorado Community

Let's dive in and see what's moving the FI insurance market this week.

1) Understanding LION's Lloyds Program for US Insurance Companies

Lloyd's of London is a unique insurance marketplace known for its flexibility, innovation, and ability to cover complex risks.

Over the past decade, we've analyzed over 25 insurance company forms from the US and UK. We took the best features of each and worked with Lloyd's underwriters to craft our own best-in-class manuscript form.

Now in its 4th iteration, our proprietary form packs a punch in just 35 pages. Here's what sets it apart:

• Seamless integration with reinsurance
• Customized exclusions for each client
• Broad notice provisions to minimize disputes
• Up to $10M capacity for D&O, ICPL, EPL, and Fiduciary lines
• Option for punitive damages wrap

Why does this matter?

In short, our Lloyd's form offers unmatched flexibility and coverage compared to standard US forms. It allows us to tailor terms to your specific needs, while still providing the security of a world-class market.

The $10M lead capacity is also noteworthy - it enables us to build robust towers efficiently for the majority of our clients.

Critically, as your broker, we are your advocate with Lloyd's. We negotiate fiercely on your behalf and stand with you if a claim arises.

Our hands-on, technical approach is our hallmark.

We're excited about how this program can deliver value for clients like you.

Want to learn more? Let's discuss how our Lloyd's form could bolster your insurance portfolio. Our aim is your peace of mind, knowing you have the best possible coverage at the most competitive terms.

That's the LION difference.

If you want to learn more about our Lloyd's manuscript, watch this video:

​>>> Watch LION Specialty’s Lloyd’s Manuscript Program​

2) Bermuda Market Shows Robust Growth; Long-Term Insurers Lead in Asset Quality

A new BILTIR study highlights the stability and growth in Bermuda's long-term insurance market (source). The island flexed its global importance, paying out $137B in benefits over 5 years.

Here are some eye-catching stats:

• 92% of rated assets are investment-grade

• Assets exceed liabilities by $231 billion

• 77% of assets in secured structures

Our take:

Never underestimate Bermuda.

Despite ILS headwinds, the market's bedrock of technical underwriting, secure trusts, and regulatory rigor creates a launch pad for innovation and scale. For FI buyers, this translates to an important diversifying source of quality capacity. As brokers, we're attuned to pockets of opportunity in Bermuda for tailored, relationship-driven placements.

3) Getting Creative to Keep Insurers in High-Risk States

With climate disasters becoming more frequent and severe, insurers are feeling the squeeze. That has led some to pull back coverage or exit states altogether. A recent article by Governing provided a great overview of solutions to keep insurance viable in these areas (source).

Here's an overview:

1) State-backed reinsurance

Some states, like Florida, have created government-run reinsurance funds. They provide a backstop for private insurers. By assuming some catastrophic risk, they aim to keep premiums affordable and prevent a market collapse.

2) Stricter building codes and land-use rules

Enforcing tougher standards for construction and development in high-risk areas can mitigate losses. For example:

• Using fire-resistant materials (more in news 4)
• Elevating structures in flood zones
• Restricting building in the wildland-urban interface

3) Catastrophe bonds and insurance-linked securities (ILS)

These financial instruments transfer insurance risk to capital market investors. That provides an alternative source of capacity. By tapping into a deeper pool of capital, insurers could potentially write more coverage in high-risk areas.

4) Expanding FAIR Plans

Most states have residual market mechanisms, known as FAIR (Fair Access to Insurance Requirements) Plans. These provide coverage for high-risk properties that private insurers won't touch. Bolstering these plans, through increased funding or broader eligibility, could serve as a market of last resort.

While these solutions offer potential, they also come with challenges.

Risk-sharing with the government must be carefully structured to avoid encouraging risky behavior. If not set up properly, it could become a "get out of jail free" card. We'd want to see targeted subsidies and premiums reflecting the actual risk. Alternative capital, while helpful, isn't a silver bullet and may become too costly in hard-hit areas.

Keeping insurance markets healthy in the face of climate change will need:

• Innovation from insurers
• Mitigation from policyholders
• Balanced regulation,
• Additional capacity from capital markets

Sure, it's a complex challenge, but with creativity and collaboration, we can find a way forward. The alternative - a slow-motion market failure - is unacceptable.

4) Colorado Community Mitigates Wildfire Risk While Reducing Premiums

As wildfires intensify, insurers are struggling to stay in high-risk areas (see previous news). But one Colorado community offers hope (source).

Villagers designed Sterling Ranch, a new development, for fire resilience.

Their strategies:

• Fire-resistant building materials
• Defensible space and native landscaping
• Firebreaks and evacuation routes
• Year-round prairie management
• Homeowner education

Insurers have rewarded their proactivity with favorable ratings and lower premiums. It's a model for aligning incentives between developers, residents, government, and insurers.

So what's the takeaway for financial institutions?

For your homeowner's insurance programs, it's crucial to work with independent agents. Directing customers to captive agents like State Farm or Farmers may limit their options and leave them underinsured.

Captive agents are beholden to a single company and can only sell that company's products. An independent agent, on the other hand, can compare policies from several insurers to find the best fit for each customer's needs.

In the absence of firewise building practices, smart insurance shopping is a key way to protect your customers' homes - and your portfolio. Educating borrowers about risk mitigation and connecting them with knowledgeable independent agents can make a big difference.

We know it's a lot to navigate out there, between market volatility, emerging risks, and an ever-evolving product landscape.

Our aim is to be your trusted guide through it all -

Bringing you the most essential intel in the most digestible format.

We're excited to have you along for the ride, and we always welcome your feedback. What are you curious about? What would you like to see us cover in future issues? Just reply to this email or give us a shout - we'd love to hear from you!

Stay covered,

Natasha & Mark

Co-Founders and Managing Partners

Lion Specialty