Buyers of commercial real estate insurance saw limited running fire capacity, greater scrutiny of time element coverage and a pressure to ensure the accuracy of valuations in the event of renewals in the middle of the year as price increases continued to decline.
Recent losses such as the first quarter Winter storm and freezing in Texas and the collapse of a condominium in Surfside, Florida on June 24, are examples of the unexpected losses that property insurers can face, say brokers.
Whether real estate interest rate increases will continue to be measured for the rest of 2021 will depend in part on how the Atlantic hurricane season develops.
Average property increases in the high single figures until mid-teens are the norm, but for losses and some challenging occupancy types, the increases can be 20% to 30% or even higher, they say.
Tougher occupancy classes of properties include habitat, heavy manufacturing, forest products, risks that have a molten exposure, food and recycling okers say.
While insurers still want to squeeze interest rates on accounts where they deem it necessary, desirable business is "quick to move toward a flat market environment," says Rick Miller, Boston-based U.S. realtor at Aon PLC's business risk solutions.
"Businesses that have performed well from a loss perspective and even the accounts that are judged to be more desirable from a occupancy perspective look reasonable, cross-border flat terms," Miller said.
"Capacity is plentiful, and if anything, what we see in a more competitive market is that insurers are willing to lay out bigger lines," he said. He gave the example of a technology account, "a well-developed risk with a pure loss experience", which last year had experienced a pandemic increase of 23%.
"This year, the insured was more prepared for their renewal. We had the right information and was lucky enough to have time to market the account and develop the appropriate strategy and managed to achieve a 3% increase in renewal, he says.
Although rare, some accounts see speed reductions., said several brokers. [1
"If it moves from a tr carrier to another, perhaps on a single operator agreement, perhaps on some divided and stratified business where we have replaced some capacity or we have changed structure, we could save money for our customers, he says.
Christy Kaufman, Madison, Wisconsin-based vice president of risk management at Zillow Group Inc., said the company's commercial real estate insurance program, which was renewed on June 20, saw a 1% to 2% reduction.
An excellent loss history, a multi-line relationship with its insurers and the fact that Zillow's executives attended insurance meetings helped, Kaufman said. Zillow has a regular commercial office and about 6,000 employees.
“We asked for a reduction. Sometimes something that is lost in risk professionals is that it never hurts to ask. "Originally, the insurer came flat, and we asked if they could do better and they shaved a little," she said.
But such speed reductions are atypical in the current market, even if the rate of increase is slower, say risk managers.
BlackRock Inc. saw an average increase of 15% to 20% per site in the renewal of its US real estate portfolio in June, said Lori Seidenberg, global head of risk management for real estate insurance at BlackRock in New York. "We were able to maintain our deductibles during the market, which is a plus," she said in an email.
The COVID-19 protocol, the pandemic's impact on individual real estate revenues, and how property managers mitigate the risk of human trafficking in their hotel portfolio were all areas of focus for insurers, Seidenberg said.
Disaster exposures, including hurricanes, fires, hail and tornadoes, continue to draw greater scrutiny from insurers, brokers say.
Wildfire capacity is limited, with a much smaller group of insurers willing to write off the risk, says Brian Dove, USI Insurance Services LLC's national real estate practice manager, based in Dallas.
"Wildfire is insurable, but scarce," said Wes Robinson, Atlanta-based National Real Estate Manager at Risk Placement Services Inc., the surplus and surplus line broker and managing unit of Arthur J. Gallagher & Co.
Prices have increased and “ imits used are very small with substantial deductibles. "It's tough," said Robinson .
"If you're in a large structure somewhere in the Malibu Hills, it's going to be very difficult to insure," he said. "
Tornadoes and hail risks are heavily scrutinized," he said. Gary Marchitello, chairman of Willis Towers Watson PLC's North American Real Estate Team in New York. terms of the extensive migration of deductibles to percentages, "said Marchitello.
Accuracy in property valuations is another area of focus in the market, where there is potentially a limitation in the amount for policyholders. ] ”Many of these previous major events have shown and reflected the inadequacy of values. … The increase in demand, material costs and contractor costs escalated significantly in the s tora events, he said.
The situation is worse now because there are shortcomings and problems with the supply chain as a result of the pandemic. "What would have taken 12 months at a reasonable cost to rebuild can now take 16 months, and it could be 20%, 30%, 40% more," says Dove.
Any time element coverage is also being reviewed by insurance companies, which are driven by some of the events that have occurred in the market over the past six months, Rouse said. "It's about providing a good amount of information and data to insurers," he said.
COVID-19 pandemic-driven supply chain disruptions have led to a shortage of chips that have affected the automotive sector and caused some automakers to halt production.
While several brokers in the London market have developed facilities to provide a certain level of coverage for exposure to viruses, bacteria and infectious diseases, they are not necessarily sought after by many policyholders, says Moraller. The price of coverage makes it cost effective, he said.