The Impact of Frequent, Costly Weather-Related Events on the Commercial Property Insurance Market

Earlier in 2020, NFP published Observations on a Turbulent Property Market and predicted further volatility for the commercial property insurance market based on two factors. The first was an above-normal 2020 Atlantic hurricane season and the second were possible increases in wildfire activity in mid-western states. Here we are at the start of 2021, and both of these events have unfortunately come true. In their State of the Market, Q3 2020, AMWINs says that the commercial property market continues to harden at an increasing rate, with storms and wildfires named as primary market drives (plus COVID-19 and social unrest), along with the usual drivers. “U.S. catastrophe losses are trending well above normal levels in 2020,” the report says.

What do more frequent, large-scale and costly weather events mean for commercial policyholders? Insurers are likely to be more careful about what they are willing to cover at what price. Carriers might want more money to take on the risk, or may leave certain areas altogether. In short, the result is higher prices and tighter underwriting. In their Q3 2020 Commercial Property/Casualty Market Index, the Council of Insurance Agents & Brokers (CIAB) showed an average premium increase of 14.2% for this line in Q3 of 2020. This is up from 13.3% in Q2, and this price has increased consistently over 13 consecutive quarters. This same report showed that commercial property capacity was cut by about 80% of agents and brokers surveyed.

For brokers and policyholders, note we are in this together. We both face the challenge of rising premiums and while rates have gone up, capacity limits continue to shrink. We do have good news. There are still plenty of carriers in the commercial property market. At Rose & Kiernan, Inc. we are deeply committed to helping mitigate the impact of these market conditions at the time of policy renewal. We will continue to follow changes in this market so that we are able to communicate with policyholders on what these might mean and how we might work together on setting appropriate pricing and expectations.

We’re always here for your commercial property insurance needs. If you have any questions, please contact Rose & Kiernan, Inc. here or by calling 800-242-2433.

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