High-net-worth homeowners are facing the hardest property insurance market “in a generation,” meaning buyers should expect higher renewal premiums.
The popular opinion from experts is that the hard property market will continue for the next two to three years.
Industry sources told Inside P&C that premium rates are accelerating with double-digit growth as insurers re-examine their books of business.
Carriers are pursuing 8%-12% increases for accounts in admitted markets, which compares to roughly 6%-8% rate increases last year, according to Inside P&C.
However, regulatory limits are blunting some rate hikes in admitted markets in states. A state’s insurance department licenses an admitted insurer, and they must comply with any state regulations.
In search of more rate flexibility, some high-net-worth (HNW) carriers have moved to the non-admitted market.
Moving from a regulated market to offering HNW homeowners excess-and-surplus policies means insurers can substantially increase rates. Sources told Inside P&C rates this year, excess policies premiums are jumping around 20% and could top 150% for wildfire, wind-prone areas.
HNW insurance carriers are struggling with inflation and rising reinsurance prices that have aggravated losses caused by weather events.
A white paper titled “Hard Market Cycle Arrives: Inflation, Natural Disasters, and More Straining Property Insurance Markets,” from the American Property Casualty Insurance Association (APCIA) outlined the challenges and urged loss mitigation for homes and properties.
The APCIA paper sights economic inflation as a leading factor driving the hard property market. The inflation rate hit 8.0 percent in 2022, a 41-year high.
Customer Actions Key to Bending Loss Curve
Mitigation is vital for easing the cost pressures for insurers and policyholders. As a result, the insurance industry encourages property owners in high-risk areas to mitigate potential losses by hardening homes and businesses.
Insurers focus on two main areas of mitigation: building materials upgrades and safety devices.
Home hardening building upgrades can include installing dual-paned windows with tempered glass and ember-resistant vents in wildfire-prone areas. And in tropical regions, having updated roofing, flood vents, and hurricane shutters.
Meanwhile, installing safety devices that can help predict and prevent damage is another mitigation focus. Those devices could include water sensors, security systems, and of course, smoke and carbon monoxide detectors.
Research from FEMA shows that every $1 spent on natural hazard mitigation in new construction can save $11 in disaster repair and recovery costs. That suggests mitigation can provide a long-term solution to reduce future insurance losses.
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