OLDWICK, N.J.–(BUSINESS WIRE)–As reform measures across the United States significantly diminish or eliminate the need for defendants to post cash bail, the business currently handled by bail bonds agents and insurance specialists may cease to exist, according to a new A.M. Best special report.
The Best’s Market Segment Report, titled, “Was 2017 the Tipping Point for the Bail Bonds Industry?” notes that critics of the U.S. bail system charge that it unfairly targets poor Americans, and now state and federal government officials have introduced numerous bills aimed at reducing cash bail as a means of pretrial detainment. Even narrow policy changes, such as the use of risk assessment tools created by data scientists and criminal-justice researchers, could help meaningfully diminish the use of pretrial incarceration across the country, though moves such as these pose a danger to the surety market’s bail bonds insurance sector.
According to the report, declines have already set in, with bail bonds insurance premiums and face amounts falling in 2017, representing what looks to be a tipping point for the bail bonds industry. Net premiums written (NPW) at six of the top 10 writers of bail bonds insurance fell in 2017, and out of the nine companies whose surety bonds portfolios are composed solely or predominantly of bail bonds business, four saw a decline in NPW. For three of those four, the year-over year percentage drop was in the double digits. The total face amount of all bail bonds written increased every year from 2009 to 2016, but declined in 2017 by 4.5%, in line with the 3.8% year-over-year decline in NPW for the bail bonds segment.
The legislative reform efforts advocated at federal, state and local levels have met heavy protestations from the bail bonds industry. Opponents of reform view the bail bonds system as a vital component of the criminal justice system and caution that current pretrial release systems in a number of states have led to what they have characterized as skyrocketing failure-to-appear rates and the release of dangerous criminals. With extensive reforms enacted either in 2017 or currently under consideration in a majority of states, a decided shift away from requiring money bail seems to be at hand. This appears to be particularly true with regard to misdemeanor and low-level felony cases and is likely going to be the rule more than the exception in the future. The impact could result in a significant shrinking of the surety bonds market’s bail bonds segment.
A.M. Best believes that, although some surety companies have somewhat diversified portfolios, the potential impact of any reforms on the bail bonds specialty writers will be substantial. Companies that write bail bonds countrywide, or at least in multiple states, should be better able than single-state or even smaller regional insurers to adjust their strategies, and to focus on states where cash bail practices have not been substantially changed.
