Article / Risk Management
Property Market - In Transition?
Property Market - In Transition?  Hero Image

As promised, we continue to monitor market actions that may impact you, your insurance program, and your business in the wake of major storms, wildfires, and earthquakes.

It’s important to note that the scope of the catastrophe (CAT)-related losses is still under assessment and the direction of the market—especially the property market—remains uncertain. Carriers have made broad commitments to provide realistic notice periods if material changes are expected on renewal to help brokers and clients manage expectations. However, this may not always happen for each and every client when the market is moving fast. We are monitoring closely to ensure carriers follow through on this critical commitment to clients. It is vital that our clients have sufficient notice to avoid surprises and identify ways to mitigate major market pricing shifts.

Here’s What is New:

  • Most markets take a close look at all factors when approaching a rate increase. They consider incumbent relationships, multi-line placements, risk quality, CAT risk profile, and historical rates. Those accounts that have aggressively approached the soft market cycle appear to be receiving a more aggressive approach in this transitional market.
  • There is still a significant amount of loss development that needs to be understood from the various CAT losses that occurred in the 3rd quarter.
  • We have yet to see the impact of potential price increases in the reinsurance and retrocession market because many of those agreements become effective at the beginning of 2018. We have seen some shrinkage in the facultative reinsurance market that drives some price increases.
  • Flat rate appears to be the new floor for property renewals. Ninety percent of the renewals that we have seen in the past 30 days have received rate increases. Clients who are willing to be disruptive to their incumbent program or who are willing to create competition through single carrier placements can significantly avoid the impact of a market in transition.
  • At present, it appears the global market access points have differing views on how to approach their renewal business. London and Continental European markets appear to be more determined for rate increases than US-based markets at this point. We will advise as we see any market shift.

With slight variation, the comments above apply to general property, energy property, and stock throughput programs.

The frame habitational/multifamily real estate clients and builders’ risk accounts are seeing rate increases between 15–20 percent and some greater, for portfolios with heavy losses and significant CAT risk. We’ve also seen movement in some manufacturing/pharma risks with CAT locations, and some markets requesting increased hail retention from clients.

There appears to be some misalignment between the market forecast of losses and the modeling company estimates, so actual loss may be different than expected. As losses develop and insurers and reinsurers become more comfortable with their ultimate incurred, this could accelerate or decelerate any present market transition.

As mentioned in our last update, we continue to have open and transparent discussions with carriers. We continue to be your advocate and do everything possible to ensure there are no surprises with renewal terms. As your advisor, we will continue to work closely with underwriters to provide them with the clearest picture possible as they evaluate pricing and terms to deliver market- competitive options.

We will continue to provide updates in the weeks ahead.

< Back to Insights & Publications
Discover more Insights & Publications  |  Read more in the Lockton Newsroom  |  See our Client Stories
Read more in the Lockton Newsroom
See our Client Stories