The commercial property market continues to feel the impacts of industry changes, with rates rising 20% on average (sometimes higher in hazard-prone areas) and an increasing focus on non-admitted accounts for coverage. Habitational and multifamily properties also feel the strain due to outdated property valuations and severe weather losses.
Although supply chain challenges have subsided, building costs continue to rise as the impact of delays on materials creates a ripple effect on construction, further exacerbated by an inflationary environment in 2023. Additionally, according to market reports, insurance-to-value (ITV) has also been off 30% or more in the last several years. Underwriters of all accounts require insureds to provide appraisals, real-time development costs, and Marshall & Swift Reports to determine the replacement cost of a building. As a result, insureds continue to see insurance premiums rise. Moreover, according to Property/Casualty360, property valuations are expected to continue to be an area of focus for underwriters for the remainder of the year.
The Brunt of Severe Weather Losses
In addition to these factors, losses from severe weather events also have insurers seeking adequate pricing, restricting coverage terms, or leaving specific geographic areas with the non-admitted market as the only option for insureds. Global insured losses from natural catastrophes for the first half of 2023, according to an Aon report, reached $53 billion – 46% above the 21st-century industry average. Insured losses were primarily driven by severe convective storm activity in the U.S., with eight multibillion-dollar events, said Aon.
It’s important to note that properties with good risk profiles and loss history and in non-cat areas find it easier to obtain competitively priced property insurance. Best-in-class properties, such as Class A high-rise office buildings, can still get affordable coverage with up to a 10% increase.
Helping Insureds in a Hard Property Market
It’s important for brokers to obtain complete underwriting data on their clients’ property portfolios, including current, supported valuations. In addition, clients should provide detailed data on building renovations and maintenance, such as new roofing or plumbing and electrical.
Carriers also seek clients committed to managing their exposures and mitigating risk. Including a narrative that outlines the loss control measures and risk management practices clients have undertaken to improve a business’s risk profile underscores their commitment to resiliency and facilitates the submission process. Risk management practices include, for example, water mitigation and the use of building materials and construction techniques that serve to minimize losses.
Some options for clients to lower their premiums include adjusting limits where it makes sense, purchasing higher deductibles, and co-insuring certain layers.
About Seneca Insurance Companies
Seneca Insurance Companies are known for having a broad appetite in writing property risks. We offer both admitted and non-admitted ISO-based policies, with catastrophe perils offered based on location and risk characteristics.
