In the US, secondary risks change underwriter priorities.
Gallagher’s research on the US real estate and hospitality business highlights significant shifts in the property and casualty insurance markets as 2024 comes to an end.
Restrictive endorsements are being removed, and other more advantageous clauses are being negotiated by insureds with up-to-date property appraisals. Hurricanes Helene and Milton had an influence, but the market has mostly escaped substantial rate surprises.
Increased market capacity and competition, especially from London-based insurers, are driving the biggest rate reductions in shared and layered (S&L) property placements, according to Gallagher.
Significant rate hikes in 2023 are now being followed by high single-digit to double-digit rate reductions for risks with large catastrophe exposures.As these programs continue to adjust for rate adequacy, single-carrier placements are seeing rate increases that range from flat to mid-single-digits, depending on claims history.
Gallagher stated that underwriter priorities are changing as a result of emerging hazards such severe convective storms, wildfires, and derechos.In regions that were previously thought to be immune to these secondary risks, such as the northeastern states, underwriters are paying more attention to roof quality and wildfire exposures.
Competition for wood frame placements in the builder’s risk market has temporarily reduced rates, but growing labour and building material prices are pushing premiums higher.Gallagher stressed the significance of meticulous construction planning and excellent submission narratives in order to reduce expenses.
For example, general contractors may opt for NFPA 13R fire suppression systems to reduce expenses, but insurers often prefer standard NFPA 13 systems to ensure both life safety and property preservation.
According to Gallagher, trends in casualty insurance renewals vary by asset class. Office, retail, and warehousing assets are examples of non-residential risks that are experiencing stable conditions with flat to modest rate increases.
The market is more difficult for habitational assets, like as hotels and multifamily homes, where insurers impose exclusions for risks like assault and battery, sexual abuse, and guns. Structured deductible plans or self-insured retention agreements can help clients with bigger portfolios control the frequency of claims.
Other segments – how did they fare?
Due to overstock, the market for directors and officers (D&O) liability insurance is still depressed. According to Gallagher, this is because of the capital inflow during the harsh market cycle of 2019–2021, which led to up to 60 viable markets providing D&O coverage.
The private D&O market has not seen the same price reductions as the public D&O market because of claims from troubled assets like low-occupancy office buildings, despite the fact that this oversupply has spurred innovation, such as parametric trigger products for public D&O.
According to Gallagher, the cyber insurance industry is still showing competitive pricing in spite of an increase in claims. Potential market corrections could occur when claims trends change, even while capacity is still plentiful.
The cost of errors and omissions (E&O) insurance has been steady, but as development activity picks back up, exposure growth is predicted to push premium rises. According to Gallagher, there are only 10 to 15 insurers providing coverage in the E&O market, which is still smaller than the D&O market.
Gallagher cautioned policyholders about criminal coverage, especially in light of social engineering frauds. Given that the crime market’s price is still consistent, clients should discuss coverage limits with their brokers in order to steer clear of sublimit traps.