Church Insurance Market Faces Crisis: Navigating Rising Premiums and Shrinking Coverage

Rising church insurance premiums and the increasing difficulty of securing coverage are leaving many churches across the U.S. struggling, with significant implications for both religious institutions and the insurance industry. Natural disasters, skyrocketing construction costs, and the unique risks associated with churches have made this a challenging segment to insure. Specialized insurers are faced with tough choices: either raise rates dramatically or, in some cases, drop coverage entirely. For insurance professionals, this shift signals the growing importance of addressing niche markets and mitigating risks more effectively.

Insurance Companies Dropping Church Coverage

Take the story of Rev. John Parks from Ashford Community Church in Houston, Texas. After being unexpectedly dropped by Church Mutual, despite having never filed a claim, his church spent five months searching for new coverage. They finally secured a policy—but at an annual premium of $80,000, a drastic increase from their previous $23,000.

This story is far from unique. Across the country, especially in disaster-prone regions like Texas, California, and the Midwest, churches are grappling with sudden policy cancellations. For insurance companies, the message is clear: traditional risk models are becoming unsustainable in the face of ongoing climate-related events, rising construction costs, and other market pressures.

A Market in Crisis

The church insurance market, a niche segment to begin with, is now facing what many industry experts are calling a “perfect storm.” Natural disasters—such as hurricanes, wildfires, and severe convective storms—have led to a surge in claims, quickly depleting the reserves of specialized church insurers. At the same time, supply chain disruptions following the COVID-19 pandemic have driven up construction costs, making rebuilding after a disaster more expensive. This increase in the cost of claims has, in turn, pushed insurance premiums higher.

Churches also present unique underwriting challenges. Unlike many other types of properties, churches often have large public spaces, rely on volunteers, and host a wide range of activities, from social services to public events. These factors make churches inherently difficult to insure. According to Charles Cutler, president of ChurchWest Insurance Services, the unregulated nature of religious organizations only adds to the complexity.

“Unregulated businesses are difficult to underwrite,” said Cutler, whose firm insures around 4,000 churches and ministries. Without the regulatory oversight found in other industries, insurers face higher levels of risk with fewer tools to control it.

Industry Adjustments Underway

In response to increasing claims and mounting losses, many major players in church insurance have been forced to make difficult decisions. Church Mutual, for instance, has pulled out of offering property coverage in high-risk areas like Louisiana, where hurricane exposure is particularly high. While the company continues to renew policies and accept new business in other states, it has adjusted its strategy in certain regions to mitigate financial losses.

This pressure is not only affecting church insurers but also the reinsurers that back them, such as Lloyd’s of London. As reinsurers seek to limit their exposure to catastrophic claims, church insurers are forced to reduce the coverage they can offer.

Strategic Opportunities for Insurance Professionals

For insurance professionals, this shifting landscape presents both challenges and opportunities. Many churches are facing staggering premium increases. For example, Greg Pihl, chair of the finance committee at Bethany Covenant Church in Connecticut, saw his church’s insurance premium jump from $12,500 to $73,000 following a flood-related claim. To cover the new cost, the church had to tap into its reserves and make budget cuts, a scenario that’s becoming all too common.

In this volatile market, insurance agents working with religious institutions will need to adopt more strategic approaches. Helping clients mitigate risk and manage their policies to avoid nonrenewals is crucial. This might involve encouraging churches to handle smaller losses in-house, saving insurance claims for larger disasters to prevent significant premium hikes or cancellations.

According to Brad Hedberg, executive vice president of The Rockwood Company, advising churches to invest in safety projects and regular maintenance can also help lower their risk profile. By proactively managing risks, churches can potentially keep insurance costs more manageable.

“If small claims get filed, your coverage could be nonrenewed or your premium could go through the roof,” Hedberg cautions. “The market is just that bad.”

Looking Ahead: What Insurers Can Expect

The outlook for the church insurance market remains uncertain. Rising claims, shrinking coverage options, and heightened financial pressures are reshaping the sector. Earlier this year, AM Best, a credit rating agency that monitors the financial stability of insurance companies, placed Church Mutual under review and downgraded Brotherhood Mutual’s rating, reflecting growing concerns about the sustainability of the church insurance market.

For insurers, agents, and brokers alike, it is time to reassess how they approach niche markets like churches. Identifying ways to spread risk more effectively, helping clients implement proactive risk management strategies, and developing more tailored insurance products will be crucial for staying competitive in the evolving market. This may also require a reevaluation of pricing strategies to balance risk with affordability for churches, especially those located in high-risk areas.

Bottom Line: The Crossroads of Church Insurance

As natural disasters and economic pressures continue to shape the church insurance market, the insurance industry faces a crossroads. Insurers must adapt to new realities or risk losing their foothold in this important but increasingly difficult sector. For churches, the need for adequate coverage has never been more urgent, but finding affordable and reliable policies is becoming a major challenge. Insurance professionals have an opportunity to step in and offer guidance, helping churches navigate the current crisis while managing their risk more effectively.

By focusing on proactive risk management, safety improvements, and careful policy management, churches and their insurance partners can work together to weather this storm. But it will take innovation, adaptability, and a commitment to protecting both religious institutions and the bottom line.