May 21, 2022
  • May 21, 2022

Rising business property insurance rates

By on February 25, 2021 0


A silver lining in the E&S market is that outside money is starting to see the sector’s profit-producing potential, which should translate into more capacity coming from insurance-related securities, RPS reported. (Credit: John Disney / ALM)

For the first half of 2021, commercial property insurance rates are expected to drop from 10% to 15%, according to Risk investment services (RPS), who noted that every commercial buyer will feel an impact from the firming market, whether through higher premiums, lower capacity, tighter terms, or a combination of the three.

Overall, 2021 is expected to bring difficult market conditions across all lines.

Part of the gain in property insurance rates can be attributed to carriers passing on higher reinsurance costs, according to RPS, which reported that insurers saw rate gains of 10 to 15% when renewing their treaties. end of 2020. This is in addition to mid-year rate increases of 25-30%.

As 2021 unfolds, reinsurance will play a larger role in tariffs, capacity and terms “as carriers continue to improve their portfolio mix and move towards the use of power. “Technical pricing,” ”said Wes Robinson, president of RPS’s national real estate brokerage, in a statement. .

Capacity constraints could hit coastal regions

From forest fires in the west to increasing tornadoes in the south-central region and the exacerbation of the hurricane season, losses from natural disasters are becoming astronomical. RPS reports that damage from Hurricane Laura is estimated to be between $ 11 billion and $ 15 billion.

The problem is compounded by the often higher cost of reconstruction following a natural disaster, as demand drives up the prices of building materials. This, along with the increasing use of technology in building construction, is causing some claims to puncture excess cover layers.

Surplus carriers were caught off guard by this, according to RPS, as the CAT models indicated that the excess layers should not have been touched. As a result, underwriters of these carriers are re-evaluating policies internally and pricing risks are up to 40% higher than model estimates.

In addition, capacity is tightening and buyers in disaster-prone coastal regions and parts of the Midwest will particularly feel the pressure, RPS reported. This will cause many people to turn to multiple carriers for layered coverage in order to get the excess limits they need.

A silver lining in the E&S market is that outside money is starting to see the sector’s profit-producing potential, which should translate into more capacity coming from insurance-related securities, RPS reported.

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