10 May Property Market Brief
Clients and Friends,
Many of you have experienced the current state of the property insurance marketplace. Heads may be spinning, but hopefully not rolling. As Hurricane season looms, a market update is due.
Insurance companies continue raising rates and heavily scrutinizing underwriting details. The trend, put in industry jargon, is that the market is hardening (rate) and tightening (underwriting).
These changes are driven by consecutive years of underwriting losses: $26.5B in 2022 and $21.5B in 2021. Underwriting losses represent the payouts by insurers in excess of premiums collected from their clients.
That’s two years of $20B+ losses in a row. And Florida is the global leader in claims. Payouts from Hurricane Ian alone are estimated to top $55B, but catastrophes aren’t the only culprit.
- Inflation is increasing claims costs from lumber to adjusters.
- Valuations are increasing because of inflation and contractor availability.
- Litigation continues to be a thorn in the side of even seemingly benign losses.
- And reinsurers are reviewing individual risks, adding further scrutiny and delays to the underwriting process.
Every industry goes through tough cycles, but years of compressed profitability followed by massive losses are resulting in property insurance increases beyond 300% in edge cases. Most will be sheltered if their risk is more attractive or property coverage is tied to other lines of business, but the market is hard.
At some point, pricing will rebound, but in the meantime, it’s important to focus on a few fundamental tenets:
- Treating your insurance relationships like partnerships lets the marketplace know how to win an account.
- Executing on reasonable loss control recommendations makes your risk more attractive than similar exposures.
- Implementing Risk Management strategies can take control of other lines of coverage to win where you can.
This is a tough time, but our entire team is riding this storm with you.