Rising church insurance premiums and the increasing difficulty of securing coverage are leaving many churches across the U.S. struggling, with significant implications for the insurance industry. Natural disasters, skyrocketing construction costs, and unique risks have made churches a challenging segment to insure, putting pressure on specialized insurers like Church Mutual, GuideOne, and Brotherhood Mutual to either raise rates or drop coverage entirely. For insurance professionals, this shift signals a growing need to address niche markets and mitigate risks more effectively.
Insurance Companies Dropping Church Coverage
Rev. John Parks of Ashford Community Church in Houston found himself searching for new insurance after Church Mutual unexpectedly dropped their coverage. Despite never filing a claim, the church spent five months navigating 13 different insurers before securing new coverage at $80,000 annually—an increase from their previous $23,000 premium.
Parks’ story mirrors that of many religious institutions grappling with sudden cancellations. This scenario is becoming increasingly common, especially in disaster-prone regions like Texas, California, and the Midwest. For insurers, the implications are clear: traditional risk models are no longer sustainable in the face of ongoing climate-related events and rising costs.
A Market in Crisis
The church insurance market, already a niche segment, is facing what many experts are calling a “perfect storm.” Natural disasters such as hurricanes, wildfires, and severe convective storms have created a surge in claims, depleting the reserves of specialized church insurers. Meanwhile, post-COVID supply chain shortages have driven up construction costs, making rebuilding more expensive and, consequently, increasing the cost of claims.
Churches also present unique underwriting challenges. With large public spaces, a mix of volunteers, and activities that range from social services to public events, churches are inherently difficult to insure. According to Charles Cutler, president of ChurchWest Insurance Services, the unregulated nature of religious organizations further complicates risk assessment.
“Unregulated businesses are difficult to underwrite,” said Cutler, whose firm works with around 4,000 churches and ministries. For insurers, this means higher levels of risk with fewer opportunities for regulatory oversight.
Industry Adjustments Underway
With increasing losses, major players in church insurance have been forced to make difficult decisions. Church Mutual, for example, has pulled out of offering property coverage in Louisiana, a decision driven by the state’s high exposure to hurricanes. While the company continues to renew policies and accept new business in other states, it has proactively adjusted its strategy to mitigate financial losses.
The pressure is not only on church insurers but also on the reinsurers that back them, such as Lloyd’s of London. Reinsurers are looking to limit their exposure to catastrophic claims, which in turn restricts the coverage church insurers can offer.
Strategic Opportunities for Insurance Professionals
The shifting landscape presents both challenges and opportunities for insurance professionals. Greg Pihl, chair of the finance committee at Bethany Covenant Church in Connecticut, saw their premium jump from $12,500 to $73,000 after a flood-related claim. The sharp increase required the church to dip into reserves and adjust its budget, a scenario becoming more common across the country.
Insurance agents working with religious institutions will need to become more strategic, helping clients mitigate risk and manage policies to avoid nonrenewals. This includes encouraging churches to handle smaller losses in-house, reserving insurance claims for larger disasters to avoid steep premium hikes or cancellations.
Brad Hedberg, executive vice president of The Rockwood Co., advises his church clients to invest in safety projects and maintenance. These proactive steps can lower the risk profile of a church, potentially keeping insurance costs manageable. In a market as volatile as this one, insurance professionals need to guide churches in making smart decisions that preserve their coverage.
“If small claims get filed, your coverage could be nonrenewed or your premium could go through the roof,” Hedberg warned. “The market is just that bad.”
Looking Ahead: What Insurers Can Expect
As the insurance market for churches continues to face rising claims and shrinking coverage, the industry will need to innovate to stay competitive. AM Best, a credit rating agency that monitors insurance companies, placed Church Mutual under review and downgraded Brotherhood Mutual’s rating earlier this year, signaling growing concerns about financial stability in the sector.
For insurers and agents, this means taking a closer look at niche markets like churches, identifying ways to spread risk more effectively, and encouraging proactive risk management among policyholders. The industry may also need to rethink pricing strategies and develop more tailored products that meet the unique needs of religious institutions while balancing risk.
Ultimately, the insurance industry is at a crossroads when it comes to covering churches. As natural disasters and economic pressures continue to reshape the market, insurers must find ways to adapt or risk losing their foothold in this important but increasingly challenging sector.