State of the Market: Insurance Update for Real Estate
I recently spoke on a real estate panel with other thought leaders in the real estate industry. We partnered with Plante Moran and covered topics like developer and cyber insurance policies, taxes and what a developer should know about wrap-ups. Below is a recap of the topic I presented, state of the real estate insurance market.
Before we get into the future state of the insurance market, let’s discuss what 2018 brought. 2018 re-introduced us to Freddie Mercury and Queen, gave us a royal wedding and three Kardashian babies.
Now onto the real estate industry…
The past 19 quarters have been a soft market with property rates declining annually in most major non-catastrophic markets. This has led to competition among property insurers. There’s also been a pattern since Q3 of 2017 where layered property programs are exiting the market.
2018 was not only a year of pop culture and social movements but also natural disasters. The California wildfires, Hurricanes Florence and Michael and the Maryland Flooding to name a few. However, 2017 was the costliest year on record for natural disasters with a total estimated damage of $306 billion according to NOAA, Ball State University for Business and Economic Research.
Looking ahead to 2019, it’s hard to say what will happen in the final season of Game of Thrones or which celebrities will break up or stay together. This is what I predict though for the real estate insurance market:
- Deductible buy down markets will likely be affected
- Larger premium increases for high-catastrophic exposed portfolios
- Shared layer property programs will see rate increases and restructuring
- Non-catastrophic portfolios with low loss ratios will benefit from flat to marginal decreases
- Improved catastrophic modeling and analytics will drive program capacity and pricing guidelines
- Carriers will be looking closer to ITV (Insurance to Value)
Pricing Forecast for Property Insurance:
- Non-catastrophic exposed -5% to +5%
- Catastrophic-exposed +5% to +15%
- Catastrophic-exposed with moderate losses +15% to +20%
Geographical Areas with Highest Rate Increases:
- South East
- West South Central
- West Coast
How to Mitigate Your Risk
- Have a disaster plan in place.
- Diversify your portfolio into non-catastrophic driven states.
- Compare alternative options outside of layered insurance programs.
Talk to a member of the ‘A’ Team for more ways to minimize risk and maximize health in 2019 and on.
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- Real Estate E-Book
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