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Resilient property market takes 2017 natural disasters in stride

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Predictions of a widespread increase in property rates following last year’s natural catastrophes have not materialized, with insurers and brokers reporting rate hikes that are generally confined to areas with vulnerability or losses related to wind and flood.

“Property insurance is moderating since a year ago, but there’s no expectation that there will be a free fall in rates,” said Joe Peiser, New York-based executive vice president and head of broking for Willis Towers Watson PLC. “That’s different. That’s the final wake-up call that we as an industry need more pricing discipline.”

The markets have been surprisingly resilient, in large part due to an abundance of capacity in the marketplace, and the devastation wreaked by Hurricane Florence in September has not changed that, experts say.

“You saw some losses, but it didn’t really tremendously impact the capital,” said Mike Rice, Denver-based executive chairman of JLT Specialty USA, a unit of Jardine Lloyd Thompson Group PLC. “I think a series of unrelated catastrophic events will push the amount of surplus and capital that’s in the marketplace to a point where … you could see more dramatic hardening," but a single catastrophe is unlikely to disrupt the market, he said.

“Insurance rates are still at historically low rates, and there’s plenty of capital in the standard insurance marketplace, and everybody seems to be able to raise more money if they need to raise more money,” he said.

Aon PLC’s portfolio data shows property rates overall are up about 7.5% in the past quarter, but “that mass generalization doesn’t really tell you anything,” said Tom Fitzgerald, CEO of Aon’s global broking division in Chicago. “Those accounts that actually have losses emanating from 2017 and a loss ratio in excess of 100% are seeing closer to a 30% rate increase. It’s important to understand that there is some rate in the property market, but it’s pretty isolated to those that have taken dollars out of the insurer community. There’s no such thing as a hard market today. There’s microsegments of the market that are more difficult.” 

 

 

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