A perfect storm is brewing in the insurance industry, and it is taking aim at property insurance. Companies should begin conversations with their brokers well in advance of their property insurance renewal, especially those whose property is located in areas considered catastrophe (CAT) exposed.
Commercial Property Insurance Perfect Storm
According to the National Centers for Environmental Information, 2016-2018 was historic in terms of the number of billion-dollar weather disasters experienced, including hurricanes, wildfires, severe storms and droughts. The U.S. saw 14 such events last year alone, and all signs point to CAT weather increasing over time.
For insurance carriers, the pressure is on to provide coverage while remaining profitable and satisfying the demands of directors and shareholders. In response, some insurance companies are exiting certain types of business altogether, placing limits on other types, scrutinizing deductibles and capping coverage.
Lloyd’s of London is requiring syndicates to submit business plans for review and approval. In some cases, they are requiring syndicates to exit certain classes of unprofitable business. Lloyd’s is also placing profitability over growth, as they are restricting the coverages some syndicates can place in 2019.
With the significant CAT losses in the past few years, carriers are repositioning their appetite to exposures in natural catastrophe zones. Carriers are tracking their CAT aggregates and pushing hard for high single- to double-digit rate increases on accounts with clean loss histories, and higher rate increases for those with losses. In some cases, carriers are reducing or eliminating their CAT capacity going forward.
Combined, all of this means fewer insurers, tighter restrictions and higher premiums going forward.
Pressure on Underwriters Affect Submissions
As some carriers move away from or change how they insure property for CAT losses and others dramatically raise prices to cover those losses, the remaining insurers are being inundated with coverage submissions. Due to the sheer volume of requests, underwriters are showing no patience with partial, incomplete submissions, as they look to only work on the highest-quality accounts.
Carriers are also looking closely at client loss-control efforts, so they can align their capacity with those companies that have consistently addressed recommendations in the past. Tracking and showing the dollars spent on these efforts will be beneficial as the insured approaches the market.
As the market hardens, it’s important to speak with your broker sooner rather than later. Work with your broker to create a go-to-market risk management strategy, and be prepared to demonstrate what you are doing and how much you are spending to mitigate risk. Your Hylant service team member or local Hylant risk management expert is always ready to assist.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.