Navigating a Hardening Property Market

800.382.2468 | AdjustersInternational.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com | 126 Business Park Drive | Utica, NY 13502 Copyright © 2020 Rising Phoenix Holdings Corporation.All Rights Reserved. If you haven’t done so already, now is the time to factor insurance premium volatility into this year’s budget. With the insurance market having favored the insured for quite a few years now, concern for predicting next year’s premium has been less than usual. Instead, a figure has been estimated, perhaps indexed a few points and then put in the budget. It has been a relatively easy value to forecast. Unfortunately, times have changed: the insurance market is hardening! What is a Hard Market? According to the International Risk Management Institute (IRMI), a hard market is “the upswing in a market cycle, when premiums increase and capacity for most types of insurance decreases. This can be caused by a number of factors, including falling investment returns for insurers, increases in frequency or severity of losses, and regulatory intervention deemed to be against the interests of insurers.” Characteristics of a Hard Market In a hardening market, carriers show less desire for growth while placing more restrictions on underwriting eligibility criteria. Carriers analyze their books of business and adjust their risk appetite and capacity in the marketplace. They focus on correcting adverse loss ratios that were developed during the soft market. As a result, insurance rates increase, capacity decreases and even the total number of carriers participating in the market decreases. Ultimately, it becomes more difficult for the insured to find the coverage needed and their negotiating power becomes limited — if not eliminated — altogether. Market Change is Cyclical It’s hard to anticipate the cyclical timing of market hardening and softening. Impacts can be severe or volatile, with premiums increasing an average of 10 percent to 60 percent, and in some cases even higher. The following chart, prepared by Broker USI Insurance Services and reformatted by the Insurance Journal, forecasted the impact of rate changes across various property/casualty insurance lines. According to the forecast chart on page 2, property categorized as Non-CAT with good loss history is projected to see upwards of a 20 percent increase in premium rates. Meanwhile, CAT-prone property with minimal loss history is facing a 40 percent-plus increase in premium. Furthermore, whether a property is CAT Navigating a Hardening Property Market Insights forYour Industry ® is published as a public service byAdjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases. PROTECTING YOUR PROPERTY ® E01-1021 By: Kyle Gibbs

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