COLORADO SPRINGS, Colo. – Property insurers were already looking for rate hikes before Hurricane Ian hit Florida’s Gulf Coast last month, and heavy losses from the storm look likely to make a tough renewal for commercial policyholders even worse.
While many of the losses from Ian, which various modelers say could result in more than $50 billion in insured losses, will hit auto and homeowner’s insurance companies hard, commercial insurers operating in Florida are also expected to pay significant amounts in storm-related claims.
In addition, reinsurers, which support insurers that operate nationwide, are expected to incur large losses and will pass some of those costs on to insurers and ultimately policyholders through higher rates at the Jan. 1renewals, according to insurance industry executives attending the Insurance Leadership Forum in Colorado Springs last week.
Organized annually by the Washington-based Council of Insurance Agents & Brokers, the conference is a key market meeting that attracts top executives from insurance companies, brokers, reinsurance companies and other industry firms.
“The real estate market, especially the real estate market, was already in a massive transition where everyone expected 1/1 to be a difficult date,” said Mike Karmilowicz, New York-based CEO of Everest Insurance, a unit of Everest Re Group Ltd.
Changes in the terms of reinsurance are likely to have a negative effect on available insurance capacity, he said.
Before the storm, real estate prices were expected to rise, said Mike Rice, CEO of CAC Specialty.
“A lot of people said they thought rates would probably go up 10 points, but after Ian it’s maybe 20 points,” he said.
“There is clearly a forecast that the market will become more disruptive as we go into 2023,” said Kevin Smith, president of global risk solutions, North America, at Liberty Mutual Insurance Co. “The capacity is going to be very, very valuable and who is going to deploy it and where is yet to be determined, but it’s fair to say it’s going to be a tumultuous market.”
Year-end renewals looked difficult before Hurricane Ian hit, and losses from the storm likely mean renewals will be even tougher for reinsurance cedants and primary policy buyers, said Mike Kerner, CEO of Munich Re Specialty Insurance, a Princeton, New Jersey-based unit in Munich Reinsurance Co.
Higher demand for catastrophe coverage as valuations have increased due to inflation, the strength of the dollar is reducing available capacity in the U.S. for some foreign insurers and climate change was already putting pressure on the market, he said.
Already, some insurers are making pricing changes, said Neil Kessler, Dallas-based president and chief operating officer of CRC Insurance Services Inc.
The real estate market will continue to be challenging in all states, said Paul Smith, Parsippany, New Jersey-based senior vice president, carrier relations, at HW Kaufman Financial Group Inc.
Little new capacity is entering the market, he said. Additionally, “Incumbent insurers want to make sure they are using their capital in a very prudent and methodical way,” he said.