Buyers of commercial property insurance can expect to see more stable market conditions overall by 2022, but for disaster-prone and loss-making accounts, capacity will continue to be difficult to secure and more expensive.
While year-end renewals were generally milder than 2020, of unexpected forest fires in December in Colorado and a significant tornado outbreak that affected several central and southern states have not yet played out, experts say. Losses from Louisiana to New York in late August and early September, according to the latest estimates from Munich Re. about two markets, said Gary Marchitello, president of Willis Towers W Atson PLC's North American real estate business in New York. Marchitello.
"We are still seeing ranges from 1
In addition to occupancy, certain geographic areas are challenging, says Brian Dove, USI Insurance Services LLC's national real estate agent, based in Dallas.
“If you are in an area with a forest fire or a hurricane county, it's a big challenge. "If you have a bad loss history, it's very challenging to get insurance companies interested in your account," said Mr. Dove.
"No matter what capacity you buy, you will pay for it, and you may not get all the capacity you want," he said. whether it's a retention strategy, a restraint strategy or a risk reduction, there are lots of things you can do, "he said. by 5% in the first half of 2022, predicts USI. Disaster-exposed property with a minimal loss history will see tax increases of between 5% and 10% or higher. 5% or more.
Rick Miller, Boston-based real estate industry leader in Aon PLC's commercial risk management business, said that although there have been 18 consecutive quarters of rising real estate prices all the time. In his portfolio, interest rate hikes began to level off towards the back half of 2021.
For accounts that have been profitable, where insurers believe interest rates are adequate, renewals are "fairly straightforward," he said. Miller.
The insurance companies are defending their better deal and this corresponds to some customers seeing flat renewals. "These are the accounts that performed quite well," said Mr. Miller.
Some accounts – the most desirable – see reductions.
Some new capacity has entered the market through various vehicles led by general agents and wholesalers, says Michael Rouse, New York-based US real estate manager at Marsh LLC.
"We have also seen some of the historic players try "Distributing a little more capacity, perhaps structuring capacity in different ways, which has benefited us. When the insurance companies increase profitability, it has helped to mitigate some of the interest rate increases in the market," said Mr. Rouse. alternative structures such as parametric coverage speed. There has been a "larger increase" in interest in parametric coverage over the past year, said Mr. Rouse.
Christie Weinstein, New York Base The CEO, risk management at Honeywell International Inc., said there was "much more interest" from additional capacity in 2021. "Some capacity has moved out of the market and other insurance companies have taken capacity. You will see it happen again in 2022 ", she said.
This in turn can lead to more competition in the market. "It may not have a significant impact on interest rate hikes, but it will definitely put more pressure on interest rate stabilization," Weinstein said. Large manufacturing companies can invest to compensate for fluctuating prices and take more risk internally, she said.
Insurance companies continue to take a disciplined approach to policy terms, say brokers. higher deductible over a wider geographic area for tornado and hail risks in the United States
Percentage levels for deductible for hail are often equal to the cost of a complete roof replacement, which provides limited or no coverage for a hail event, Mr. said Dove.
Property valuations are also heavily scrutinized by insurance companies, as well as coverage of contingent time elements, and that attention is expected to increase further. The cost of materials to rebuild real estate has increased during the pandemic, as well as the cost of labor, which affects the cost of losses and can lead to loss-making creeps, say brokers.
Since insurance companies are likely to have more questions, buyers need to be prepared to explain their values, said Mr. Miller. "We are working with them to help them understand their values," he said.
in Marchitello. The capacity for these exposures has been halved, he said.
The risks perceived to have oversized exposures to suppliers, such as manufacturing and high-tech industries, are most affected, Marchitello said. The companies that can provide a higher level of detail and explain how they manage their supply chain and have robust business continuity plans will be perceived as better risks, he said.
Overall, the market continues to be fragile, and an event or uncertainty could move it in a more negative direction for buyers, said Mr. Rouse. "At the same time, if we see less frequency or difficulty from a loss point of view, it can be better for customers as well. Time will tell how the market reacts in 2022," he said.