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No mitigation of increases in property rates is expected in 2021



Buyers of commercial real estate insurance will continue to see higher prices in 2021, with interest rate hikes in the high numbers to 15%, even on pure accounts, Risk Placement Services Inc. said in a report on Tuesday.

Interest rate hikes on loss-making accounts will be even higher, says Rolling Meadows, Illinois-based surplus and surplus line broker and management unit for Arthur J. Gallagher & Co. in its 2021 real estate market outlook in the United States.

Every commercial insurance buyer will feel the effects of the real estate market, whether through higher premiums, less capacity, stricter terms or all three, RPS said in a statement accompanying the report.

Interest rate increases are partly due to the leaked effect of higher reinsurance costs passed on by insurers, RPS said in the report.

Insurers saw interest rate hikes up 1

0% to 15% to renew their treaties by the end of 2020 in addition to average increases of 25% to 35% on average, RP S said.

Reinsurance will "play a greater role in interest rates, capacity and terms as carriers continue to improve their book composition and move towards the use of" technical pricing ", says Wes Robinson, National Real Estate Manager for RPS, in the statement. If the reinsurance rate has risen sharply, "losses have not let up, so many carriers are still not making money," said Robinson.

The real estate market has also been affected by climate change, the RPS said in the report. Washington burned close to six million acres and destroyed thousands of structures, causing billions of dollars in insured claims by 2020, according to the report.

In response, standard real estate markets pulled out of the breadth of California, cover many of these losses, the premiums are "much higher than what most insurance buyers ä are willing to pay ", says RPS.

Recently, losses from tornadoes and convective windstorms in the Midwest report also exceeded insurers' expectations, leading to double-digit interest rate hikes and capacity constraints.

Last year's hurricane season in the Atlantic was also particularly active with 12 hurricanes landing in the United States, RPS said.

Capacity will be particularly tight for buyers in disaster-prone coastal regions and parts of the Midwest, requiring many to cover stocks from multiple insurance companies to get the exceeding limits they need, the report said.

Other conditions and remarks in the wake of COVID-19 include new infectious diseases and riot exemptions, and more time element restrictions, entry / exit business interruptions, it said.

These restrictions should be seen especially in vulnerable business classes such as restaurants and restaurants with shop windows, says RPS.

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