Buyers continue to explore alternative risk financing options such as captives, parametrics and insurance-linked securities as market conditions for property insurance remain challenging.
They are also using more data and analytics as they look to differentiate their business and demonstrate better risk control to insurers, experts say.
In the soft market, there’s less incentive to invest in risk improvement, said Scott Ewing, Martins Ferry, Ohio-based head of Americas risk consulting for Axa XL, a unit of Axa SA. “Now, in many cases, it’s a condition of coverage,” he said.
Policyholders who better manage and improve their risks are likely to fare better in the tough property insurance market, Mr. Ewing during the Risk & Insurance Management Society Inc.̵7;s Riskworld annual conference in Atlanta last week.
In a market where the amount of capital and the cost of capital are beyond the control of risk managers, it is critical to focus on the quality of the data they provide to underwriters regarding their organization’s values, said Crystal Flack, Dallas-based vice president, real estate and hospitality practice. , at McGriff Insurance Services LLC.
“Are we doing everything we can to show our risks in the best possible light and present them in a way where a carrier can look at it, model it against their book and say, ‘Yes, it makes sense for us to continue to be partners at a rate that is not debilitating,” Flack said.
Policyholders with large accounts and larger middle markets are “frustrated” by continued property rate increases and are looking at alternative ways to insure or self-insure property risks, based on the price levels of coverage, said Michael Chang, head of corporate risk and broker for North America at Willis Towers Watson PLC.
WTW is seeing “a lot more use” of parametric products, Mr. Chang.
There has been consistent interest among more sophisticated policyholders in captives over the past two years, said Alfred Bergbauer, New York-based head of captives, multinationals, programs and TPA services at Hartford Financial Services Group Inc.
“Almost everyone is looking at restructuring their real estate programs due to the availability of limits, pricing and the introduction of higher deductibles and restrictive covenants. For clients who have the balance sheet and risk sophistication to look at risk financing in a different way, captives are just another tool,” says Bergbauer.
Cell inmates and single-parent inmates respond well to property risks, said Michael Serricchio, Norwalk, Conn.-based CEO of Marsh Captive Solutions, a unit of Marsh LLC.
Marsh has seen 7% growth in captive real estate premium under its management in North America over the past two years to $10 billion in premium, he said.
“You’re seeing fronted reinsurance, you’re seeing quota shares, you’re seeing excess. You’re seeing captives taking part in property stocks that you’ve never seen before,” Serricchio said.
The next marker for the industry will be the June 1 and July 1 reinsurance renewals, which have a heavy focus on US property catastrophe business, including Florida.
Looking beyond the middle of the year, market conditions will depend in part on how the Atlantic hurricane season plays out.
“I think it will level out in ’24,” said Joe Peiser, New York-based head of commercial risk solutions, North America, at Aon PLC.
“The current market will be happy with the rate and the values that they have,” said Mr. Fireplaces.
In addition, capacity is likely to increase as more ILS investments enter the market, he said.
Gavin Souter contributed to this report.