Catastrophe-Exposed Property Market – When Disasters Strike, Rates Hike

Over the past couple of years, catastrophic events have taken a major toll on the property market.  Claims for damages caused by hurricanes, flooding, and the California wildfires have resulted in record losses by carriers.


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The commercial property market began showing signs of hardening at the end of 2018, a trend that accelerated in 2019 and continues into Q1 2020.  According to the Council of Insurance Agents & Brokers (CIAB), commercial property rates increased 8.8% in Q3 2019, rising from 8.5% in Q2 2019, 5.9% in Q1 2019, and 2.9% in Q4 2018. 

Catastrophe (CAT)-exposed properties, in particular, experienced double-digit rate increases of 10-15% with coastal areas at 15%+.  CAT markets are still available, but carriers continue to reduce their exposure by restricting capacity, narrowing terms, lowering limits, raising rates, increasing deductibles, and in some cases, denying coverage altogether.  With an emphasis on profitability, underwriters are carefully scrutinizing insurance-to-value (ITV), tightening guidelines and demanding better data to properly evaluate risks.  With property valuations being a major concern for carriers, ITV has affected premium even when rate increases are moderate.  Risks with losses, poor valuations, and older construction are seeing significant rate hikes.  More carriers are offering actual cash value with less buy-back options on buildings with older roofs as well as lower limits on barrier islands and higher hazard occupancies.  Fewer carriers are offering hurricane and calendar-year deductibles on new business.

Overall, carriers are taking a more conservative approach to underwriting CAT-exposed property, which means that brokers must be more strategic when going to market.

HOW ALL RISKS CAN HELP

  • Exclusive Property Facility – All Risks’ proprietary catastrophic property MGU provides our brokers with access to a broad range of products and designated capacity for CAT-based perils.  Our product lines include property (wind, quake, and flood), terrorism, equipment breakdown, and cyber liability.  Capacity is allocated using the latest modeling technology.

  • Technical Expertise – Our property brokers strategically approach the marketplace using catastrophe modeling tools and thorough knowledge of carrier appetite.  Experienced brokers help identify and develop targeted loss prevention strategies to drive down the cost of exposure losses to improve insureds’ risk profiles.  It is common practice for All Risks brokers to call underwriters directly to discuss risks in-depth.  Our trusted market relationships could offer customized terms and conditions needed to secure coverage for your client.

  • Carrier Relationships – As renewals and new business placements become more difficult, relationships play a critical role.  Retailers need a wholesale firm with credibility in the marketplace.  Over the last 55 years, All Risks has developed long-standing partnerships with top tier E&S carriers to ensure our retail agents have access to multiple players.  Our brokers hit the market fast, follow up quickly with underwriters and manage renewals earlier.
  • Market Education – Communication is key in a changing marketplace.  We keep our retail agents apprised of all market shifts and trends so that they can prepare their insureds for the possibility of non-renewed policies, lower limits and higher rates.  Some customers are accepting larger deductibles and retaining more of the risk.  Before accepting this new trend, we assist with form comparisons and coverage clarification to ensure you and your clients are well-informed before selecting a policy.

  • Customer Experience – Timeliness and responsiveness are critical in a hardened market.  We understand the needs of our retail agents and are structurally organized to offer in-house services to deliver quick turnaround time on quotes and policies.  Our brokers are located nationwide and collaborate efficiently to exceed your expectations.

Contact us for more information on CAT Property

Legal Disclaimer: Views expressed here do not constitute legal advice. The information contained herein is for general guidance of matter only and not for the purpose of providing legal advice. Discussion of insurance policy language is descriptive only. Every policy has different policy language. Coverage afforded under any insurance policy issued is subject to individual policy terms and conditions. Please refer to your policy for the actual language.