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Property insurance pricing stable after Superstorm Sandy: Marsh analysis

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Property insurance pricing stable after Superstorm Sandy: Marsh analysis

Superstorm Sandy's effect on property insurance pricing was muted in the first quarter of 2013, but underwriters are scrutinizing storm and flood risks more closely, according to a study by Marsh Inc.

The report, “Benchmarking Trends: Property Insurance Market Remained Stable in First Quarter,” said despite Sandy being the second-costliest storm in U.S. history, it has not been a market-changing event in terms of insurance rates.

Average property insurance renewal rates for Marsh clients in the first quarter were: 3.8% for policyholders without catastrophe exposures, almost flat for policyholders with moderate catastrophe exposures and 3.6% for those with significant catastrophe exposures, the report said.

“The stable rate environment in part reflects that rates that had been rising steadily for some time in more catastrophe-exposed parts of the country have now reached a plateau,” the report states.

However, the storm has prompted underwriters to closely scrutinize terms and conditions, especially those related to the distinction between flood and storm surge.

“In the past, property insurance rates have typically spiked after major catastrophic events, such as hurricanes Katrina and Ike and the Christchurch and Tohoku earthquakes,” Marsh said in the analysis. “The post-Sandy rate environment has, to date, been relatively stable, with the major effects of the storm coming in the form of changes to deductibles, limits provided and policy definitions.”

During the first quarter of 2013, however, 84% of Marsh's clients saw no change in their deductible levels.

Given this new level of attention to policy definitions from underwriters, risk managers should work to achieve a clear understanding of how various perils are defined under their policies, the report states.

“This scrutiny of definitions and deductibles related to windstorm, flood and storm surge is expected to continue for the next several months,” the report states. “Underwriters may also extend this discussion to consider whether tsunami belongs under the definition of either flood or earthquake.”

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