AllDigital Nonrenews California Risks

By Steven Barge-Siever, Esq.

If you’re a tech company with fewer than 250 employees, there’s a good chance AllDigital is on your insurance program.

And if you’re in California, be ready for a nonrenewal letter.

Over the past few weeks, we’ve seen something many brokers and clients didn’t anticipate: formal non-renewal notices on D&O and EPL policies - often with no warning, no negotiation, and very little explanation.

The catalyst? AXIS has pulled its admitted management liability capacity from AllDigital Specialty in California, citing deteriorating small business EPL conditions.

But this change came quietly. We've found no public announcement, no statement from the carrier, and only one article (behind a paywall) acknowledging what happened. And it's not limited to EPL.

What Do the Axis/AllDigital California Nonrenewals Actually Say?

Despite EPL being the catalyst, here’s the AllDigital non-renewal language some clients are receiving:

“We will not renew this policy when it expires. Your insurance will cease on the Expiration Date shown above.”

“The reason for nonrenewal is that the risk exposures have materially changed and do not meet current underwriting criteria.”

But the companies I’ve spoken with haven’t materially changed. The risk hasn’t changed. Insurer appetite did.

Clients Want Reliability

One of the most durable lessons I took from placing large, complex Fortune 500 programs at Aon and WTW:

You don’t just compare pricing - you evaluate ability to pay. To do this you determine whether a carrier will: 1. cover a large loss (policy language), and 2. be able to absorb large losses and still be there when it matters (financial stability).

Because what good is insurance that doesn’t insure?

Every few years, a new offering - most often, via MGA - enters the market. They lead with pricing. They flood into specific sectors, win business through efficiency and discounting, and then, inevitably, face a hard decision: raise rates significantly or exit entirely.

That’s what we’re seeing now. Carriers that priced small business and tech D&O/EPL at ultra-low levels are now walking away. Not tapering. Not renegotiating. Leaving.

Sometimes the Discount Is Worth It

There is a valid counterargument to stability. Even Fortune 500 companies sometimes take a discount knowing it may not last.

For most companies, two or three years of deeply discounted pricing is a simple win.

It’s a form of opportunistic arbitrage. And that logic holds up - as long as the client understands the risk and the broker has a contingency plan.

The problem is when clients take that risk unwittingly, based solely on quote comparisons, without any real awareness of downside exposure. Again, the ability to 1. cover a large loss (policy language), and 2. absorb large losses and still be there when it matters (financial stability).

That’s where the broker’s job changes. No just to eliminate this year's risk - but to understand the tradeoffs and, most importantly, to have a contingency plan.

The Math Behind the Moment

Over the years, I've seen AllDigital quotes priced 30 – 50% below the rest of the market - specifically on California tech risk. It looked great. It was also somewhat questionable as I led the Fintech Practice at Vouch (an insurance company that competes with AllDigital). But the math is tough to actuarially justify:

• One D&O or EPL claim can easily cost an insurer $1M.

• A $2,000 annual policy premium would require:

  $1,000,000 ÷ $2,000 = 500 clean policies to cover a single loss

  
  

And that excludes admin costs, commissions, taxes, and reinsurance - making the real number closer to 750 - 1,000 clean policies to cover a loss.

Perhaps even more importantly, losses typically don’t appear in isolation - they occur in clusters, triggered by macro shifts like layoffs, regulation, and employment volatility.

When the claims hit, carriers without years of reserves face forced exits.

The Risk of Over-Reliance

We’re now seeing the fallout from brokers (and clients) relying too heavily on a single underwriting channel. And this problem is even more acute when considering the complexities of D2C (broker/underwriter) MGAs - these models fundamentally rely on a single underwriting channel (and reinsurance that is outside of their control).

When that channel shuts off, your broker needs to have a sufficient bench of insurance carriers as backup - and experienced brokers to market the accounts with diligence.

We’ve had clients come to us asking two questions:

1. Can you help replace this coverage?

2. What actually happened?

The answers:

1. Yes - we access all insurance companies without playing favorite. 2. A program built to scale distribution - not sustain volatility.

Side Note: The MGA Business Model Mirrors the VC Playbook

Many/most clients weren’t buying AXIS directly. They were buying coverage through an MGA (AllDigital Specialty) that built a platform for rapid D&O and EPL issuance. And while MGAs are a valuable part of the market, they are distribution models, not balance sheets.

They don’t underwrite volatility. They don’t hold reserves. And they don’t always price for longevity.

The model is eerily similar to early-stage startups: grow fast, scale revenue, hit distribution numbers. But insurance doesn’t pivot well. Especially not admitted business governed by rate filings and regulatory oversight.

The Takeaway

There is nothing revolutionary or unprecedented happing with this year's Axis/AllDigital nonrenewals.

And this isn’t about traditional vs. insurtech. It’s about the fundamentals of insurance economics:

• Risk must be priced to survive the cycle.

• Reserves matter.

• Capacity is not infinite.

Cheap premiums feel efficient until they disappear. And when carriers leave the market, they don’t send press releases. They send non-renewal notices.

If you get a notice of non-renewal (they will come 90 days before your policy expires) reach out.

At URM, we build every program assuming this can happen. If your EPL or D&O coverage has been disrupted, or you want a second set of eyes on what’s next, we’re ready to step in. If you want to understand your risk, we have analytical tools geared for tech.

Upward Risk Management LLC When expertise is non-negotiable.

By Steven Barge-Siever, Esq.

URM | Founder & CEO

steve@upwardriskmanagement.com

www.upwardriskmanagement.com