MAY 11, 2020 08:47 AM (EDT)
Best’s Market Segment Report: Bail Bond Insurance Market Faces Legislative Headwinds
|David Blades, CPCU |
Associate Director, Industry
Research and Analytics
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FOR IMMEDIATE RELEASE
OLDWICK - MAY 11, 2020 08:47 AM (EDT)
Predictions that the bail bond insurance market would wilt in the face of cash bail reform appear to have been premature as industry premiums have not shown meaningful declines in recent years, and increased in 2019, according to a new AM Best market segment report.
The Best’s Market Segment Report, titled, “Bail Bond Market Faces Legislative Headwinds,” states that despite significant legislative changes in a number of states, overall direct premium written (DPW) volume for bail insurance underwriters grew in three of the last five years, including by 8% in 2019 to $1.4 billion. Bail bond DPW in 2019 was 10.4% higher than it was five years earlier, despite some fluctuation during the period. Legislative reform measures have varied by state, but criminal justice reform efforts ostensibly have been aimed at creating a more equitable system. These measures have threatened to substantially transform—if not largely eliminate—the use of cash bail as a primary means of pretrial detention. This attempted transformation has generated frustration from bail industry supporters, especially from members of the law enforcement community, as well as bail agents and bondsmen who make their living in the industry. Critics maintain that these measures have had or will have a negative effect on the rate of recidivism, and as a result, on crime rates as well. Even in states where bail reform has been passed successfully, those criticisms have not abated.
The COVID-19 pandemic has added new layers of complexity to bail reform discussions, and as a result, it will impact companies providing bail bond insurance. COVID-19 has created near-impossible social distancing challenges for jails, which were already overcrowded, to manage. Many criminal justice reform advocates have thus called for the release of pretrial detainees for their own safety, as well as the safety of the broader community.
At the same time, capacity for bail bond insurance appears to be available, as indicated by two additional companies entering the market to write bail premium in 2019, bringing the total number of companies to 27, including some affiliated entities. The total face amount of all bail bonds written rose every year from 2009 to 2016. However, in line with DPW trends, which showed declines in 2017 and 2018, the year-over-year face amount written increased by 5.7% in 2019.
The potential for significant disruption in the bail bond insurance segment, driven by criminal justice reform, is still significant, however, and has become a reality in some jurisdictions. AM Best will continue to monitor the financial conditions of rated and unrated bail bond insurers, along with any strategic initiatives these companies undertake to deal with a small, but very dynamic sector of the property/casualty insurance industry’s surety market.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=296978 .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.