Commentary/Opinion
Wall Street’s Next Crash Won’t Be Human-Induced: The Looming Threat of AI-Triggered Market Meltdowns : Risk & Insurance
AI is increasingly used by traders to make fast decisions and maximize profits, but the speed of these decisions and the lack of human oversight means that the ripple effects of just a few transactions can quickly amplify and send markets into a tailspin.
The Scenario: Fast forward a few election cycles. A new president takes office. As per usual, a changing regime comes with a changing stance on economic policy. The nation’s new leader calls for sweeping regulatory changes that will increase government oversight and tighten financial controls that impact major U.S. corporations across every industry. Naturally, this changes the financial forecast for these companies. Expenses will increase and profits will drop – along with investor confidence. Stock prices fall and sales of shares accelerate.
This is nothing new. Differing stances on regulation, taxation and debt tolerance always trigger different market reactions. Take for example how both the Dow and S&P plummeted after President Trump’s announcement of broad import tariffs, only to rebound after some of those tariffs were rolled back. Powered by speculation and predictions, the stock market is volatile by nature. A little bit of uncertainty is all it takes to send stock prices into a tailspin.
Only now, artificial intelligence is playing a bigger role in trading decisions, amplifying the effects of quick reactions that rule stock market fluctuations.
Every firm on Wall Street has an AI platform that tracks market shifts 24/7. Machine learning algorithms are scanning the web and detecting pessimistic viewpoints about the impact of tightened regulations on market activity and growth. They predict, based on decades of historical data, that this outlook means that stock prices will drop. They react as traders have reacted every time price drops occur – sell, sell, sell. But this time the reaction is swifter and more universal. Computers don’t stop working at 5 p.m. when markets “close.” There is no naturally built in pause that has typically allowed human investors to wait and watch before making sweeping decisions. The systems plow through every circuit breaker and continue doing what the data has trained them to do. Selling incites more selling.
News
Why the E&S Market Continues to Grow
The hard market is among the causes for the growth of the excess & surplus market that had previously been considered a safety valve for the admitted market.
An estimated 34% of U.S. commercial business is placed in the excess & surplus market, with the U.S. surplus lines market producing more than $115 billion in premium in 2023, according to Amwins' “State of the Market—2025 Outlook." The growth trajectory of the E&S market has been significant over the past six years, with premiums growing by double digits, the report says. Further, what's even more notable is that the market has been growing unabated over the past 20 years.
The hard market is among the causes for the growth of a market that had previously been considered a safety valve for the admitted market.
“There has been a shift in how carriers want to price risks and align their capital with risk," says Kevin Doyle, CEO of Risk Placement Services Inc. (RPS). “When you boil all that down, the big trend that we've seen over the last four or five years is continued flow into the E&S world. I don't see that slowing down anytime soon."
“There are trends that we're seeing in the overall marketplace that aren't necessarily specific to the E&S market but have had an impact on the E&S marketplace," says David Nelson, executive vice president, E&S wholesale, Nationwide. “There's been a marked increase in the frequency and severity of catastrophic events since 2017. Most recently, we saw the impact of Hurricane Milton and Helene that rolled through Florida but also created flooding in North Carolina, as well as the wildfires in California—not a day goes by that we don't see a potential storm impacting the marketplace."
As extreme weather events increase and catastrophe risk spreads to new areas, growth within the E&S property sector has been significant.
“The difference is the actual insurable risks that lie in the path of all those potential CAT exposures where people historically didn't have as much of an exposure," Doyle says.
Research
The weekly roundup of the biggest InsurTech stories on FinTech Global | May 12-19, 2025
Global InsurTech investments increased by two-thirds in Q1 as investors’ interest recovers Key Global InsurTech investment stats in Q1 2025:
- Global InsurTech investments increase by two-thirds QoQ in Q1 2025
- Average deal value rose to $13.6m as investors’ interest recovers
- Azos, a Brazilian InsurTech focused on delivering accessible life insurance solutions, secured one of the largest InsurTech deals of the quarter with a $30.5m Series B round
Global InsurTech investments increase by two-thirds QoQ in Q1 2025
In Q1 2025, the global InsurTech sector recorded 55 deals, down 15% from the 65 deals completed in Q1 2024.
However, this marked a 41% increase compared to the 39 deals closed in Q4 2024, indicating a moderate rebound in transaction volume following a subdued end to 2024.
While the sector hasn’t returned to early 2024 activity levels, the upward trend suggests improving investor sentiment entering 2025.
Funding in Q1 2025 reached $746m, a slight increase of 4% from the $718m raised in Q1 2024 and up significantly—by 68%—from the $444m secured in Q4 2024.
This positive shift in capital inflow highlights a recovering funding environment, with investors showing a renewed willingness to back InsurTech ventures following a cautious close to the previous year.
Average deal value rose to $13.6m as investors’ interest recovers
The average deal size in Q1 2025 was $13.6m, up from $11.4m in Q1 2024 and a notable rise from $11m in Q4 2024 as well.
This growth in average deal value suggests investors are increasingly targeting mid-sized or strategically promising companies rather than spreading capital thinly across numerous smaller firms.
As the sector stabilises, capital appears to be concentrating around scalable or differentiated InsurTech propositions.
Azos, a Brazilian InsurTech focused on delivering accessible life insurance solutions, secured one of the largest InsurTech deals of the quarter with a $30.5m Series B round
The funding round was led by Lightrock, alongside Kaszek Ventures, Prosus, Munich Re Ventures, Maya Capital, and early Facebook investor Kevin Efrusy.
With a mission to democratise financial protection in a market where 82% of the population lacks active life insurance, Azos has built a strong presence through its tech-enabled, broker-aligned approach and a rapidly growing national footprint.
The company has issued approximately $10.8bn in insured capital to date and experienced exponential growth in 2024, doubling its policy issuance and increasing premium volume by more than 2.5 times, all while maintaining a Net Promoter Score above 80.
This latest capital infusion will bolster Azos’s proprietary technology, fuel its product development pipeline, and expand its distribution capabilities across Brazil’s underserved life insurance market, solidifying its position as a leading InsurTech player in Latin America.
Study Shows IBHS's FORTIFIED Program Reduced Hurricane Sally Damage
Coastal homeowners with FORTIFIED homes are better protected from hurricanes than those living with standard construction, a first-of-its kind study by the University of Alabama's Center for Risk and Insurance Research (CRIR) commissioned by the Alabama Department of Insurance has shown.
The peer-reviewed study analyzed the real-life effectiveness of the Insurance Institute for Business & Home Safety (IBHS) FORTIFIED mitigation program, a voluntary construction and re-roofing standard designed to strengthen and protect homes from high winds and heavy rain, during Hurricane Sally.
It found FORTIFIED homes suffered significantly less damage and required fewer insurance claims than homes built through standard construction methods when Hurricane Sally made landfall at Gulf Shores, Alabama, as a strong Category 2 storm in September 2020.
The FORTIFIED homes also fared better than homes built to municipal building codes with identical criteria but without the documentation and evaluation FORTIFIED requires for designation. While the study did not examine the cause, it is likely the robust evaluation process required to receive the IBHS FORTIFIED designation plays a factor.
The study estimates that insurers would have saved $105.6 million in losses if all homes in the storm's path had been built or retrofitted to the FORTIFIED Roof standard. Insurers would have saved $116.1 million if the homes had been built to the FORTIFIED Home─Gold standard which adds in protection from damage typically caused by more intense storms.
Strong Sales of New Battery Electric Vehicles Face Tariff Threat
Mitchell, a leader in the development of innovative auto physical damage technology solutions, today released its Plugged-In: EV Collision Insights report for Q1 2025. This edition of the quarterly publication examines how new U.S. tariffs are threatening consumer adoption and sales of battery electric vehicles (BEVs). It also explains why these automobiles are at a disadvantage compared to their internal combustion engine (ICE) counterparts when it comes to import taxes.
"Rapid shifts in trade policy are reshaping the automotive landscape, with tariffs affecting not only the cost of components but also the dynamics of assembly, supply chain transparency and even pricing strategies," said Ryan Mandell, Mitchell's director of claims performance. "While these challenges impact all automakers doing business in the U.S., they are more pronounced for manufacturers of BEVs. Insurers will need to collaborate closely with suppliers and collision repair partners to navigate tariff complexities and prepare for future uncertainty."
Prior to enforcement of the automotive tariffs, BEV sales were strong in Q1—representing 9% of new vehicle sales in the U.S. and 10% in Canada. With more of these electric alternatives on the road following a second year of record sales, the frequency of collision claims for repairable BEVs increased again last quarter to 3.12% in the U.S. and 4.48% in Canada.
Among the report's other findings:
- Claims Severity: BEVs continue to have the highest severity when compared to plug-in hybrids, mild hybrids and ICE alternatives.
- Last quarter, average severity for repairable BEVs was $5,927 in the U.S. and $7,026 in Canada, a decrease of 10% and 7% respectively compared to Q4 2024.
- Total Loss Frequency: Nearly 11% of all collision-damaged BEVs were declared a total loss, down 1% from the previous quarter. That is identical to the total loss frequency for new ICE automobiles, which are like BEVs in their complexity and cost to repair, and 12% lower than for all ICE automobiles combined.
- Parts Utilization: OEM parts are more frequently used in the repair of BEVs. In Q1 2025, 88% of the parts dollars on estimates for repairable BEVs were for OEM parts compared to 64% for ICE automobiles.
- Regional Differences: The North American markets with the highest number of collision claims for repairable BEVs are also those with the highest penetration of BEVs per capita. Both British Columbia and Quebec outpaced all other regions with BEVs representing approximately 8% of all repairable vehicle claims. MORE
Embedded Insurance
Root, Hyundai join forces to expand auto insurance | Insurance Business America
Root taps Hyundai for its embedded distribution channel
Insurtech company Root partnered with Hyundai Capital America, the captive finance arm of Hyundai Motor Group, in a move aimed at offering data-driven, competitive auto insurance rates directly to car buyers.
The agreement extends Root’s reach in the automotive space and aligns with its ongoing strategy to scale through embedded and partnership-based distribution. Hyundai Capital America provides financing for Hyundai, Kia, and Genesis vehicles.
“This collaboration further diversifies and expands Root’s offerings across distribution channels,” said Alex Timm, Root’s co-founder and CEO. “Our partnership channel has seen new writings increase 115% year-over-year as our pipeline continues to expand across the automotive, financial services, and agent sub-channels.”
Timm emphasized that partnerships and embedded insurance remain central to Root’s customer acquisition strategy. “Building differentiated access to customers remains a core pillar of our company strategy. As the partnership channel grows, we plan to continue to eliminate friction in the purchase experience by moving partners to fully embedded experiences,” he said.
Will Ontario auto policy sales move to car dealerships?
Auto insurance sales, in some form, could be coming to Ontario car dealerships under a plan outlined in the province’s 2024 budget.
It would let the Financial Services Regulatory Authority (FSRA) use its Test and Learn Environment (TLE) function to develop pilots “to support the creation of more innovative automobile insurance products and services with the goal to improve customer experience and affordability.”
What that would do, Stuart Carruthers, a partner at Stikeman Elliott LLP told a regulatory segment at the Insurance Bureau of Canada (IBC) InSight Summit 2025, is “…empower FSRA to launch a pilot to allow auto dealers to sell auto insurance in their dealerships on the sales floor, either traditional auto insurance or embedded insurance products that are sold as part of the vehicle bundle.”
Telematics, Driving & Insurance
Even Tesla's Insurance Arm Is Getting Wrecked Right Now
Tesla's insurance arm is taking a beating by paying out more than it earns from premiums, according to data from S&P Global.
This is significantly higher than the national average loss ratios calculated for other insurance companies.
It could mean that not even Tesla can repair its own cars affordably after an accident.
In 2019, Tesla set out to lower insurance rates for owners of its electric cars. The goal was simple, at least in theory: fix the broken cost of car insurance. Instead, Tesla may have broken its own calculator trying to make sense of repair costs.
See, Musk's vision of Tesla's insurance product was that traditional companies just didn't "get it." Tesla's data claims that its Full Self-Driving software has fewer accidents than a human driver. Plus, its cars are rolling computers that can collect copious amounts of data on its drivers and adjust risk based on their driving. So why wouldn't drivers get a lower rate for putting around with FSD enabled if they also happen to be a safe driver? Tesla quickly found out that despite these assumptions, it's still taking a bath on claim-related losses.
Today
FEMA "not ready" for hurricane season, internal review
The Federal Emergency Management Agency is "not ready" for hurricane season in June, according to an internal review obtained by CBS News— as FEMA contends with staff cuts and a push by President Trump to eliminate the nation's disaster relief agency.
The powerpoint presentation was created after FEMA's new acting leader, David Richardson, ordered the agency to review hurricane preparedness, with storm season roughly two weeks away. In a series of slides, dated May 12, FEMA identified apparent problems at the disaster relief agency, including a need to "refocus on its core mission while preparing for the 2025 Hurricane Season."
"As FEMA transforms to a smaller footprint, the intent for this hurricane season is not well understood, thus FEMA is not ready," said one of the slides.
Elsewhere in the presentation, it says most of FEMA's readiness process for hurricane season "has been derailed this year due to other activities like staffing and contracts" — an apparent reference to layoffs of probationary workers and sweeping changes to FEMA's contract workforce.
"It has not been normal hurricane season preparedness yet," the slides read.
Fraud
As Execs Eye AI for Fraud Detection, Deloitte Predicts Billions in Savings
With a growing share of insurance executives viewing generative artificial intelligence as a tool for streamlining and improving functions like fraud detection, Deloitte predicts that AI technologies could save the property/casualty insurance industry tens of billions of dollars in the next few years.
Deloitte wrote in a report that by implementing AI-driven technologies across the claims life cycle and integrating real-time analysis from multiple modalities, P/C insurers could reduce fraudulent claims and save between $80 billion and $160 billion by 2032. Insurers that integrate multimodal capabilities using AI and advanced analytics could generate potential savings of 20% to 40%, depending on the implementation, type of insurance and sophistication of fraud detection systems, according to the report.
Webinars/Podcasts/Interviews
The Risks Right Now Market Shifts Shaping US Auto Insurance | Wednesday, May 21, 2025 | 2:00 pm ET
The Risks Right Now: Market Shifts Shaping US Auto Insurance
Wednesday, May 21, 2025 | 2:00 pm ET
Multiple long-term trends reached inflection points in 2024. Due to major shifts in retention rates, shopping levels and attorney representation, the future of the US auto insurance industry has never felt more fluid.
Join us to better understand the drivers impacting rate shopping, driving violations and premium growth. Don't miss the view of current trends and insights from industry experts that identify new and shifting sources of risk.
North America & Non-GDPR Jurisdictions: Register here
GDPR Jurisdictions: Register here
Moderator, John Weber Senior Associate Editor, AM Best
Panelists
- Jeffery Batiste, SVP & GM, US Auto and Home, LexisNexis Risk Solutions
- Tanner Sheehan, VP & GM, US Claims, LexisNexis Risk Solutions
InsurTech Rap: Thursday, 5/22, 2-2:30pm ET
Join the discussion with… - Leading Insurtech VCs - Carriers, Reinsurers, MGAs - Emerging technology vendors
Buckle up!
Hey Rappers,
This week, Tiana Pidgeon from American Family Ventures, will be my co-host as we chat with Scout Insurtech, NJ Fast, and RevTech Labs to discuss the essential strategies for insurtech startups to maximize their benefits from accelerator programs.
See you Thursday.
Dave Wechsler, Principal, OMERS Ventures
People
Former Progressive CEO and Chairman of the Board Glenn Renwick,
The Progressive Corporation and our extended Progressive family mourn the loss of former CEO and Chairman of the Board Glenn Renwick, who passed away on Friday, May 16, at the age of 69
During a highly successful 32-year career at Progressive, half of which he served as CEO, Glenn’s integrity, leadership skills, business acumen, and innovative approach dramatically affected the financial and competitive position of the company he led, as well as the lives of the people with whom he worked. Over that 32-year period, Progressive’s annual revenues grew from about $750 million in 1986 when Glenn was hired to nearly $27 billion at the time of his retirement.
As he said many times, his ultimate goal was for Progressive to become U.S. consumers’ top choice for auto insurance, and after he stepped down as CEO in 2016, the company continued its remarkable growth under the leadership of his chosen successor, Tricia Griffith.
“Glenn’s contributions to Progressive were enormous, but one of the first things that comes to mind as I reflect on his work is his commitment to our Core Values. He was a standard bearer for them, living them fully and intentionally every day,” Tricia said in an internal post to the company. “Glenn was an incredible leader and all he ever wanted to do was leave Progressive better than he found it. Without doubt, he accomplished that.”
We extend our deepest condolences to Glenn’s family and friends, many of whom continue to carry on his legacy with the company.