Insurers Move to Raise Rates in Property Market

Buyers have grown used to price cuts in the property market in recent years, but insurers are now taking a harder stance. Insurers are seeking additional premium wherever possible and applying stricter underwriting, particularly to property valuations. Rate increases seem to be gaining traction as leading markets pare back on unprofitable lines. Still, those viewed as good risks can expect to do better than more challenging exposures.


The turnabout in market tone comes as insurers recognize the impact of the general erosion of rates and terms over the long-term; as major markets adjust their risk appetites, offer lower limits and strengthen underwriting oversight; and as the insurance-linked securities market reassesses after recent losses. The London direct and facultative property markets were showing significant strengthening in rates early this spring, (source) and reinsurance treaty renewals may follow suit.

The push for rate increases stem, in part, from the hurricane and wildfire losses that reinsurers and alternative capital have taken over the past two years. While alternative capital seemed to have taken the big 2017 catastrophes in stride, caution is more evident after 2018 as growth in alternative capital shows signs of slowing. (source)

After a record-breaking 2017 hurricane season caused nearly $100 billion in insured losses from Harvey, Irma and Maria, 2018 brought lower, but still significant losses, with California wildfires doing the most damage. Total global insured catastrophe losses of $80 billion for 2018 were above the $41 billion average of the last 30 years, but significantly below the $140 billion in losses in 2017, Munich Re reports. (source)

Discipline is the watchword among markets that have been feeling the impact of large catastrophe losses over the last two years from hurricanes and wildfires. Reinsurers have become more selective, and insurers are cutting back capacity where losses have been unacceptable. Insurers are also taking a close look at non-catastrophe, or attritional losses, particularly for multi-family housing.

Lloyd's of London, in particular, is introducing risk-based oversight for underperforming syndicates. (source) Some syndicates at Lloyd’s have closed their property books, and others are retrenching.


The impact is significant in the MGA segment, which has been highly supported by the Lloyd’s market. Insureds may need to reassess the ability of smaller markets to participate on their risks and at what level. Larger and more established MGAs may have adopted new restrictions.

More than ever, technology is changing the evaluation and pricing of risk as insurers increasingly turn to advanced data and analytical techniques to reprice underperforming classes. Carriers are reinforcing the need for stricter underwriting based on hard data, including making greater use of predictive models when it comes to convective storms. Difficult classes of business — such as frame habitational, dealers open lot, recycling operations, food processing and manufacturing with a contingent time element — face higher prices, less capacity and perhaps a head-to-toe re- evaluation. In-depth understanding of these tools is critical in creating the right insurance program at the right price.

Easier classes of business with fewer losses may see rates from flat to 5 percent higher, while increases may be significantly higher for more difficult exposures. Some placements may have to be reworked to remain competitive, but where markets have paid significant losses, accounts may be better off remaining with their incumbents. Risks that have performed well and have remained loyal to their markets will also be in a better position and are likely to take only a small increase for catastrophe pricing.

While rates are rising, the increases follow years of sometimes significant cuts. With insurers trying to push rates higher, brokers who are creative and actively in the market are the key to building a cost-effective insurance program.



Buyers in wind-prone areas should expect upticks in prices. Accounts more exposed to catastrophic wind may see price increases from the high single digits to the mid-teens. The resort hotel market, in particular, has constricted. Areas that have not experienced more recent losses may get more scrutiny because of the time lag between catastrophes. Hurricane Michael, for instance, is proving more costly than originally expected for the reinsurance and insurance-linked security markets. That’s partly because a long delay between big storms meant there was an abundance of older buildings that are not as resilient as newer ones.

Hurricane Michael, the fourth strongest recorded storm in terms of winds to hit the United States, and the strongest to ever hit the Florida Panhandle, caused $10 billion in insured losses. Hurricane Florence caused $5 billion in insured losses, with the damage focused on the Carolinas, and much of it uninsured amid widespread flooding. Going forward, the rezoning of flood areas will likely be a factor in the market, particularly as it relates to named storms.


Across the Midwest, carriers are putting greater scrutiny on potential losses from convective storms, especially hail. A tornado that tore a mile-wide path of destruction through central Alabama and killed nearly two dozen people in March of this year showed the dangers posed by such sudden, powerful storms. (source) Damages from hail storms can easily reach into the billions, including the $2.3 billion in insured losses for a May 2017 Colorado storm, (source) and $1 billion for a June 2018 Dallas-area storm. (source) Tornadoes caused about 40 percent of catastrophe losses from 1997 through 2016, according to Property Claims Services. (source)

Many carriers have adopted strict underwriting guidelines excluding certain classes of business in convective-storm-prone states such as Colorado, Texas, and Oklahoma, and all carriers continue to push higher, percentage deductibles. Many standard, and even excess and surplus markets, are no longer writing buildings with rooflines in excess of 50,000 to 100,000 square feet, most notably lessors’ risk and warehousing. Dealers open lot and multi-family housing are particularly difficult to place in these states due to poor loss performance. Primary markets are either reducing their capacity or withdrawing from the classes altogether; insureds should expect to experience significant premium increases even with clean loss history.

Convective storm models are also playing a greater role as insurers seek to better quantify potential losses. While predictive models for severe thunderstorms have been available for years, carriers are now making greater use of them. The models calculate the overall risk to a property along with a building’s ability to withstand damage. Insureds in areas classified by the models as high hazard or with large roof areas or a history of losses from hail, tornadoes and straight-line winds should expect greater scrutiny.


Multi-family dwellings remain one of the most difficult classes of business. Lloyd’s of London has cut back on writing these risks, and other carriers are scaling back, seeking much higher deductibles
on a percentage basis or exiting the business altogether. Risks that have to find a new insurer may face very significant rate increases. Texas and Colorado multi-family remain particularly difficult as the hail exposure adds to other risks endemic to apartment complexes. Very limited markets are willing to place properties with remediated aluminum wiring, and even fewer are willing to entertain unmediated. Besides often seeking percentage deductibles, carriers are taking a much stricter approach on insurance-to-value.


The huge wildfires spread by high winds in the last two years are reshaping California’s insurance market. The Camp Fire alone caused $12.5 billion of the total $18 billion in insured wildfire losses as it obliterated the northern California town of Paradise and burned nearly 14,000 homes. (source) The Woolsey Fire drew global headlines as it scorched the celebrity enclave of Malibu, causing $4 billion in insured losses. (source) With those kinds of losses in mind, carriers are paying greater attention to wildfire scores, and many insureds are turning to excess and surplus markets where they face higher prices, higher attachment points and higher deductibles. Properties in a brush zone should expect sharply higher prices and deductibles.


In the absence of big events, the earthquake market remains stable, but may have hit bottom. While there may be pressure for rate upticks, plenty of capacity remains. The last significant earthquake to hit California was the 2014 Napa quake, which caused just $150 million in insured losses (source) and had little impact on the market. It’s been 25 years since the Northridge quake and 30 since the Bay Area Loma Prieta quake.

The risks, however, increase with time. Alaska was hit by the most damaging earthquake since 1964 on Nov. 30, 2018, when a 7.1 magnitude quake struck the Anchorage area, causing tens of millions of dollars in damages. (source) Oklahoma, a state not normally thought of as earthquake-prone, has been rocked by hundreds of minor quakes in recent years and a 5.8 quake in 2016. The quakes are thought to be linked to the growth of hydraulic fracturing, or fracking, in oil drilling. (source)


Municipalities face tougher market conditions in hail-prone areas. Municipal buildings with large roofs are particularly challenging. This is particularly true for inland Texas through Oklahoma and Colorado, where buyers may see higher rates than in coastal areas. Multi-year deals that are coming up for renewal may see significant changes. For many inland school districts, there are no single-carrier solutions, and deals are being done on a quota-share basis with much higher retentions. The risk pools that have handled many of these risks traditionally are dealing with losses.


Stock throughput has become especially difficult after recent losses and years of competitive pricing. Rates are going up as fewer markets show interest. Many syndicates are declining to write certain commodities, and only a limited number remain available for perishables, tobacco, food and pharmaceutical risks. While London is more restrictive on Cat-exposed accounts and now requires modeling for such risks, more domestic capacity is becoming available.


Dealer open lot coverage is also challenging as insurers grow wary of large car lots and big dealership buildings with large roof footprints in areas susceptible to convective storms. Waste management and recycling operations should expect a more difficult market because of poor loss adjustments as well as past price reductions. Food processing risks are seeing more focus on quote-share deals rather than single-carrier placements. For wood products, insureds with sawmills and pellet mills are seeing the highest rate increases.


Communication is crucial in today’s rapidly evolving market. Insurers have embarked on a course correction as they strive to refocus on profitable lines of business while reducing capacity in other areas. Underwriting discipline, increasingly backed by data analytics, has become a focus for many markets. In this challenging environment, clients can expect CRC Group producers to consistently canvass all appropriate markets, communicate market changes early and to provide strategies to develop the most appropriate and cost effective insurance programs. In an increasingly data-driven industry, CRC’s focus on data can provide an advantage. While many accounts face potentially significant changes in their insurance programs, knowledgeable brokers prove their value in a changing and challenging market.


Jeff Bianchi is a Senior Vice President in CRC’s San Francisco Office and member of the Property Practice Advisory Committee.

Ed Magliaro is the Office Vice President of CRC’s New York office and a member of the Property Practice Advisory Committee.

J.J. Morrow is a Senior Vice President in CRC’s Chicago, IL office and a member of the Property Practice Advisory Committee.

David Pagoumian is the Office President of CRC’s Red Bank, NJ office and a member of the Property Practice Advisory Committee.

Justin Purdy is a Senior Broker in CRC’s Houston, TX office and a member of the Property Practice Advisory Committee.

Ryan Purdy is a Senior Broker in CRC’s Houston, TX office and a member of the Property Practice.

Natalie Sienkiewicz is the Office President of CRC’s Bothell, WA office and a member of the Property Practice.

Emma Garner is an Executive Vice President in CRC’s New York office and a member of the Property Practice Advisory Committee.

Ian Kampfer is a Senior Vice President in CRC’s New York office and a member of the Property Practice Advisory Committee.

Mark Sangenito is a Broker in CRC’s Dallas, TX office and a member of the Property Practice.

Farrah Schubmel is a Senior Vice President in CRC’s Chicago, IL office and a member of the Property Practice Advisory Committee.