State of the Market: Property Insurance Continues to Rise


The property insurance market was already under pressure before Hurricane Ian swept through the southwestern part of Florida, causing, by some estimates, up to $75 billion in insured losses. In addition to severe weather events over the last several years, inflation and supply-chain disruptions are pushing insured losses and premium rates higher.

Let’s take a closer look at the issues impacting property insurance rates.

Climate Risks: Severe Weather Events

Climate risks continue to cut into property insurance underwriting profitability. Before Hurricane Ian’s late-September landfall, 2021 was the second-most expensive year on record for insurers, primarily due to destructive hurricanes and tornadoes, freezing weather, and flooding across the United States. Damage from natural disasters cost insurers $120 billion last year alone. Property reinsurers, particularly for catastrophe programs, as a result, have increased their rates.

Ian is set to increase reinsurance pricing levels even further in 2023. Expectations are that Ian will become the second-costliest hurricane ever for the U.S. Property & Casualty industry. For example, so far, Swiss Re has reported a third-quarter net loss of nearly $500 million after absorbing $1.3 billion in preliminary claims from Hurricane Ian. Hurricane Ian is expected to cause approximately $1.58 billion in losses after retrocession, according to Munich Re.

Inflation and Supply Chain Challenges: The Perfect Storm

Today’s inflationary environment and the high cost of goods, materials, and labor combined with ongoing supply-chain disruptions have increased the cost of claims of commercial and personal property losses. Claims remain open for longer as required components, materials, and labor become more expensive and difficult to obtain due to continued supply-chain challenges. The price hikes for construction materials and other goods and supplies are driving up insurer loss costs, pushing premiums higher.

Reinsurers are pressuring insurers and their brokers to ensure property valuations reflect inflation rates in order for coverage for replacement cost/construction costs and rates to be aligned with today’s price of supplies and labor. In addition to getting the appropriate rate, accurate property valuations will help ensure that the cost to rebuild doesn’t exceed an insured’s coverage limits.

What Does This Mean for the Property Insurance Market?

Carriers are continuing to de-risk their portfolio by limiting exposure to high-risk perils and properties in coastal and wildfire-prone areas. Reinsurers are also restricting capacity due to concerns over inflation, the impact on loss costs, and the scarcity of retrocessional coverage. We recommend that clients go out to market early for upcoming January renewals.

Underwriters are applying greater scrutiny during the renewal process, carefully reviewing loss histories and open claims. However, even clients with non-CAT exposures and good loss history in some cases need help getting capacity on their property insurance.

Insurance to value (ITV) is at the forefront of discussion in the current market as banks push values to keep pace with inflation and rising costs. These figures should reflect the full value of a covered commercial property and its contents, as it is a key piece in the exposure analysis that enables carriers to allocate capacity, set terms and conditions, and price the risk appropriately. Customers need accurate valuation data to ensure they are properly insured. The partnership between the insured and the broker is critical to establishing accurate values. In order to address the needs of all parties, underwriters are often using margin clauses, scheduled limits, and coinsurance and offering different types of valuation. 

Underwriters are also being selective on policy terms and conditions and applying sublimits and high deductibles on water damage-related coverages.

With the property insurance market continuing to harden, more business is entering the Excess & Surplus lines arena. Seneca Insurance Companies offer admitted and non-admitted ISO-based property policies for appointed E&S brokers, with an in-house capacity of up to $75 million. Full limits are available as well as primary and excess layers, with our overall capacity remaining stable during this market cycle. Our broad appetite includes habitational, bars and nightclubs, HOAs, hospitality, industrial, manufacturing, mercantile, nursing homes and senior living, office buildings, receiverships, residential, student housing, and vacant properties.

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