Understanding Today’s Real Estate Property Insurance Market

04/17/2023 Written by: AP Real Estate Team

There are many challenges in the real estate property market today. How did we get here, and why is it different from previous hard markets?

Not only has the frequency and size of weather events increased, but the definition of CAT has changed. Today we’re having events in states not historically impacted by extreme weather. And they are occurring more regularly and more severely. Following hurricanes Harvey, Irma, and Maria, the deterioration of insurance companies’ loss ratios accelerated.

After years of extreme weather events, carriers lost basic underwriting discipline in their rates, deductibles, and limits or capacity deployed. They allowed valuations to remain stagnant instead of increasing replacement costs with general inflationary trends. Insurance companies could do this because of cheap capital and reinsurance, allowing them to purchase market share without fear of underwriting results. To correct their portfolios, they increased rates and deductibles.

Historically, following a significant event such as 9/11 or hurricane Katrina, the insurance market would recover hard and fast for six to eight months before steadying. But this market is substantially different, with steady changes and rate increases that have been sustained and prolonged since 2018.

Losses due to consistent, major CAT events have led to large carrier losses. To tackle the issue, underwriters are relying on data and modeling, and they are carefully reviewing replacement cost valuations.

After years of up-and-down markets, the availability of information is expected to lead to a more consistent, stable, and disciplined marketplace over more extended periods. And the highs and lows will be much smaller compared to years past.

What can you do when capacity is difficult and expensive? Work with an experienced broker who will set realistic expectations. AssuredPartners’ in-house data analytics team uses numerous programs and reviews multiple data points to help our clients proactively. And our team explores alternative programs, such as captives, deductible buy-downs, and parametric solutions, to present clients with every option and program structure available.

The underwriting process is also more involved today. When preparing submissions, it’s critical to be detailed and complete. Quality submissions are more likely to get the attention of the underwriter.

Lastly, don’t overlook the importance of incumbent relationships. Long-term relationships are often more valuable than the small savings gained by changing your insurance carrier. Think about buying insurance as a multi-year partnership versus an annual event. Frequently moving your account can hurt you in the long term.

With seismic changes expected in the property insurance market, the AssuredPartners Real Estate team has the necessary tools, resources, and experience to help. Contact us today to learn more.

Adapting to Change: Mastering the Shifting Landscape of Casualty Insurance
Real Estate07/16/2023

Navigating today's casualty marketplace can be daunting, but with a proactive and strategic approach, it is possible to thrive in this challenging environment. Here are some strategies to consider: ...

Finding Your Story: 3 Stories that Make-or-Break Insurance Costs
Real Estate03/02/2023

Introduction: What is your organization’s story to insurance underwriters? Fundamentally, underwriters rely on available facts to quote and issue an insurance policy. Today, facts come from multiple...

Construction Delays and Limiting Policy Language Impact Policyholders’ Recovery
Real Estate05/23/2022

Many property policies contain contractual limitation provisions. These policy provisions are valid and enforceable in most states. The provision limiting the amount of time policyholders have to...