Authors: Stacie Kroll Paul Pousson, ARM, DRM
Gallagher continuously monitors the general insurance market to provide insights into the evolving landscape of risk management and insurance. Recognizing that not all market trends directly impact the higher education sector, this report is tailored specifically for higher education decision-makers. It offers detailed insights by line of coverage, geographic region and risk financing method, leveraging Gallagher's 40-plus years of experience in supporting institutions of all types and sizes.
Key market trends impacting higher education
These following factors, coupled with the declining public perception of higher education, contribute to a challenging insurance environment for institutions.
Reduced casualty insurer participation
- Fewer liability insurers are underwriting higher education risks, which is reducing competition and impacting terms and pricing.
- Insurers are favoring institutions with lower risk profiles, often excluding major research universities (R1) and Division 1 athletic programs.
Rising antitrust claims
Increased claims are driving higher premiums, stricter terms and heightened scrutiny in directors and officers (D&O) insurance.
Financial strain on institutions
- Declining institutional revenue is increasing exposures, such as deferred maintenance, staffing reductions and program cuts.
- Efforts to generate additional revenue through new activities and/or reduce operating expenses through outsourcing key functions may introduce further risks, complicating insurability.
Improvement in property and cyber markets
Some carriers are re-entering the property and cyber insurance markets, expanding capacity and creating opportunities for rate relief for institutions with strong risk management practices and credible data. These factors, coupled with the declining public perception of higher education, contribute to a challenging insurance environment for institutions.
Property insurance
The property insurance market for higher education is stabilizing, with gradual improvements for institutions with strong data and minimal losses. Key issues include:
Extreme weather events. In 2024, the US experienced $27 billion in weather and climate disasters. Insurers are closely examining exposures to severe convective storms, wildfires and floods.
Accurate property data. Insurers require detailed secondary Construction, Occupancy, Protection and Exposure (COPE) information and proper valuations. Incomplete data can lead to higher premiums and limited renewal options.
Alternative solutions. Institutions are exploring creative strategies like group purchasing, structured reinsurance, captives and parametric coverages.
Business income values. Underwriters are focusing on business income (BI) values, urging institutions to conduct comprehensive evaluations to validate exposures and adequacy of limits.
Institutions in regions requiring catastrophic coverage are seeing stabilization in rates and terms, though wind and hail deductibles remain a challenge. Shared and layered programs are yielding more favorable outcomes compared to standard markets.
Casualty/liability insurance
The casualty insurance market remains challenging, with higher education institutions facing unique pressures:
Litigation pressures. Increased lawsuits, litigation financing and escalating jury awards are driving up liability rates. Public skepticism of higher education's business model exacerbates the litigious environment.
Sexual assault and misconduct (SAM). Broadening reviver statutes, nuclear jury verdicts and historical misconduct discoveries are creating difficult market conditions.
Workers' compensation. Claims remain stable, but concerns about an aging workforce, rising medical costs and workplace health trends persist.
Auto liability and physical damage. Inflation, supply chain issues and advanced vehicle technology are driving rising premiums. Institutions with proactive fleet safety measures and detailed data are better positioned for favorable terms.
Executive lines
Management liability (D&O and educators' legal liability)
Institutions face premium increases, reduced carrier availability, restrictive policy terms and heightened reputational risks from adverse publicity, antitrust litigation and student-athlete compensation issues.
Cyber insurance
The cyber insurance market is softening, with depressed rates and increased capacity due to improved risk controls like multifactor authentication. However, institutions remain prime targets for cybercrime.
One particular emerging risk is the presence of AI-driven threats. The adoption of AI introduces risks such as sophisticated social engineering attacks (e.g., deepfakes), requiring strategic risk assessments and an enterprise-wide governance infrastructure. Enhanced risk management controls are continuing to foster competition among carriers, offering institutions more options and cost benefits.
Proactive strategies to improve your risk profile
In today's challenging insurance market, higher education institutions must adopt deliberate measures to improve their risk profiles. These strategies can mitigate exposures and position institutions as attractive risks to insurers:
Enhance data accuracy and transparency. Provide detailed property data (e.g., secondary COPE), proper valuations and comprehensive fleet data to help insurers assess risks effectively.
Strengthen risk management practices. Implement robust controls, such as multifactor authentication for cybersecurity, driver training for auto liability and proactive safety protocols for workers' compensation.
Conduct comprehensive risk assessments. Regularly evaluate exposures, including business interruption values, deferred maintenance and new revenue-generating activities.
Adopt innovative risk financing strategies. Explore alternatives like group purchasing, structured reinsurance, captives and parametric coverages to diversify risk financing methods.
Address reputational and litigation risks. Develop crisis management plans, ensure compliance with regulatory requirements (e.g., Title IX) and conduct legal audits to mitigate litigation exposures.
Conclusion
The higher education insurance market faces significant challenges across multiple lines of coverage, driven by evolving risks, reduced carrier competition and heightened scrutiny. While property and cyber markets show signs of stabilization, liability and management liability remain pressured by litigation trends, reputational risks and regulatory complexities.
Gallagher's deep expertise and tailored insights empower institutions to navigate these challenges effectively. By leveraging innovative risk financing strategies and proactive risk management practices, institutions can secure favorable outcomes and achieve long-term resilience. As the landscape evolves, Gallagher remains committed to supporting higher education institutions in mitigating risks and fostering sustainable growth.
