RT Property has released their March 2023 US Property Insurance Review, providing a market overview and a look at the fallout from Hurricane Ian, the holiday winter storm, the California "atmospheric river series," the wildfire season and more. An excerpt is below, and you can read the entire review on the Ryan Specialty Blog or download the PDF here.
As we begin 2023, the commercial property insurance market continues to face several material challenges. Macro factors include both extreme weather events and sustained inflation, placing pressure on insurance and reinsurance companies and driving premium increases throughout the US property arena. As the industry responds to Ian from the 2022 hurricane season, several insurance companies and managing general agent underwriting facilities have introduced more restrictive terms and conditions along with increased insurance rates on their catastrophe (CAT) capacity. Delegated authority has been reduced in some instances, with the variation depending on territory, occupancy, claim history and strength of the trading relationship. Loss-free non-CAT business has remained less affected, with rate increases in the low-to-mid single-digit range.
The Wholesale & Specialty Insurance Association (WSIA) Stamping Office Premium and Transaction Report - Annual 2022 confirmed the continued expansion of the excess & surplus (E&S) lines sector, with a 24.1% growth rate for 2022 representing the largest year-over-year expansion in stamping office premium since the association began recording data in 2009.
This expanded flow of business into the excess & surplus lines segment of the market continues to impact the property market, with increased submissions to underwriters. Workloads have grown significantly, making quality submissions more important than ever before. It is vital that insureds work closely with their retail brokers and wholesale trading partners to ensure their submissions clearly and effectively outline all important details for underwriters, creating the best conditions for the review process and subsequent negotiations.
We expect rates in the property market will continue to increase throughout the coming months, as key wind-driven account renewals will determine the trajectory of rate hikes. The magnitude of rate increases is difficult to predict and will depend on specific account risk profiles and their industry class segment. We expect CAT wind capacity deployment will continue to be more constricted and tightly controlled. Toward the end of 2022, we saw the most significant rate increases have been found on loss-driven accounts, risks with a heavy catastrophic footprint and challenging occupancies. In contrast, accounts which have performed well from a loss perspective and insureds committed to risk management improvements, are able to obtain more favorable renewal outcomes albeit still with rate increases. Another area where insureds can improve their position in today’s challenging commercial property market is by increasing self-retention levels. Increasing self- insured retentions allows insureds the ability to stay above normal loss expectancies, which can allow for underwriting credit by insurance company underwriters with a reduction in attritional loss frequency. In addition to higher retention programs, insureds are now evaluating other alternative risk options, such as parametric products, financing strategies and captive utilization.
Restrictions in policy terms and conditions, which escalated following the outbreak of the COVID-19 pandemic, have now become more standard in nature and remain primarily focused on communicable disease. Cyber coverage also remains a challenge to incorporate into policies with restrictive language being added, and at times, requiring monoline cyber policies to be purchased when coverage is needed. Valuations for location property values continue to be at the forefront of negotiations, and we are seeing restrictive occurrence limit of liability and / or margin clause endorsements becoming more frequent on renewals. This is a direct result of underwriting concerns for the reinforcement of property reporting of insurance to value (ITV) on scheduled statement of values (SOVs). In addition, expansive details are now more often required by insurance company underwriters for contingent business interruption exposures, with requests for disaster recovery and business continuity plans becoming more commonplace in our experience. Overall, we have seen a modest shift back to carrier- led forms, although the need to incorporate broker manuscript language on larger programs continues to be negotiated in many instances.