BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Property insurance rates firm during year-end renewals

Property insurance rates firm during year-end renewals

Commercial property insurance rates increased at Jan. 1, 2018, renewals with price hikes ranging up to low double-digit percentage increases, brokers and other experts say.

Catastrophe-exposed programs and programs that suffered losses during last year’s hurricanes saw the biggest increases, but other property insurance programs saw flat renewals or single digit increases, with few accounts seeing any rate decreases, they say.

In addition, the renewal discussions were more prolonged than past renewals as insurers sought significant rate hikes in light of estimated 2017 catastrophe losses of more than $130 billion.

As renewal negotiations began, underwriters quoted significant increases on catastrophe-exposed accounts and accounts that had suffered losses, said Duncan Ellis, U.S. property practice leader for Marsh L.L.C. in New York.

In most cases, however, increases were “modified back into the single-digit to low double-digit increase range,” he said. Although, “problematic” accounts saw higher increases.

“It has generally become the standard for underwriters to almost universally ask for increases on renewal, which is a huge change from many years of softness,” said Gary Marchitello, New York-based head of property broking for Willis Towers Watson P.L.C. “But what they ask for and what they wind up getting are very different.”

“The anecdotal evidence is that loss-affected accounts and catastrophe-exposed accounts are seeing increases,” he said.

Loss-hit regions will probably see double-digit increases, according to Tracy Dolin-Benguigui, director and sector lead for S&P Global Ratings Inc. in New York. Territories which have not been hit are likely to be flat to slightly up.

“Overall, we will probably see some degree of price hardening in property accounts, double digits for loss exposed and single digits for non-loss exposed.” Ms. Dolin-Benguigui said, adding that “You have to differentiate catastrophe exposed from actual loss impacted accounts.”

Hurricanes Harvey, Irma and Maria, earthquakes in Mexico and wildfires in California made 2017 one of the worst loss years on record, which put pressure on underwriters to increase rates after years of decreases. Reinsurance rates also rose as a result of the losses.

“We’ve probably had ten straight years of rate erosion in conjunction with terms and conditions erosion in the property market space,” Mr. Ellis of Marsh said. “Post these events that we’ve had in 2017, obviously underwriters are looking at this as an opportunity to get some of that back.”

“Some markets are finally saying ‘No’ or ‘Yes, with some modifications’,” he said.

“Flat is the new down,” Mr. Ellis said. “Accounts used to seeing reductions year over year,” may now see quotes flat to up a percentage or two.

“Pre-event, we certainly had a number of years of softness and declining rate and by and large that’s been arrested and the market’s trying to find itself,” said Mr. Marchitello.

Commercial property has been one of the weakest insurance markets over the past several years, said James Auden, managing director at Fitch Ratings Inc. in Chicago.

“This year, with the number of events in various geographic areas, I think there is upward momentum for pricing in commercial property in the next round of renewals,” he said.

Morgan Stanley in a January 3 research note also noted the effect of the catastrophe losses on the renewals market and predicted some primary accounts would see 25% increases. 

With losses still being tallied, however, the Jan. 1, 2018, renewals were more prolonged than other recent renewals.  

“It is to be expected negotiations will take longer in a transitioning market,” Mr. Marchitello said.

“What took one day now takes two; what took a week now may take two weeks because underwriters are pushing back” Mr. Ellis said. “There are more negotiations going on because there are more things being negotiated.”

In addition to pricing, terms and conditions have also come under pressure as the market shifts.

Catastrophe deductibles are under pressure, especially around wind, flood and earthquake exposures, with insurers looking to push up deductible percentages for some exposures and modify deductible caps and maximums, Mr. Ellis said.

Reductions in the commercial property insurance are rare.

The market is still seeing declines now and then, such as with new business which may not have been aggressively marketed by previous brokers, according to Mr. Marchitello.

“Obviously, we’re seeing very few accounts getting reductions,” Mr. Ellis said, adding that these can be accounts may not have seen the marketplace in some time and thus haven’t captured recent past year’s reductions. “These are few and far between,” he said

Looking forward, it’s unclear how long the firming will last, given the abundant capacity still in the market.

“You might have price movement in property near-term, but it’s not like we hear capacity leaving the market broadly,” Mr. Auden said, adding that industry capital and surplus, despite the losses, grew in 2017. “There’s still plenty of capacity in the market.”

“This is not a hard market in any way as we have not seen any pullback on capacity,” Mr. Ellis said. “While rates are under pressure, capacity remains abundant. It’s just a pricing issue for that capacity, at the moment.”










Read Next

  • Hurricane losses represent major test for alternative capital market: Official

    Aaron Koch, director, insurance-linked securities group, property/casualty division, at U.S.-based actuarial firm Milliman Inc., said that the insurance losses due to recent hurricanes represent a major test for the alternative capital market's risk selection and operational capabilities, reports. "The alternative capital market will share broadly in these losses, leading to what is likely to be the first year in the market's history that it will deliver a sizeable negative return to its investors," Mr. Koch said.