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Property Catastrophe Insights

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What brokers need to know about the property-catastrophe market in 2015

Author SamanthaKimball , 12/11/2014
After a year characterized by low catastrophe losses and soft market conditions, insurance agents and brokers can expect a continuation of competitive property-catastrophe pricing. This trend, combined with new, emerging risks and the ever-present risk of storms, earthquakes, and terrorism, will characterize the market in 2015. Even in this soft market, insurers are reserving the more competitive prices for new accounts and attempting to hold the line on renewals. This may tempt brokers to re-market programs. But figuring out when to re-market can be challenging; expertise matters here. Brokers must be able to read the market to know when to re-market or restructure, since that approach may not generate enough of the sought-after cost savings. Account loss experience and previous rate history certainly play a factor. It also may damage long-term relationships with insurers for short term gain. Relationships can be particularly important with the catastrophe-exposed account. The best strategy for securing rate reductions is attention to detail. To understand and price risks, underwriters rely on catastrophe models. These models, in turn, rely on detailed engineering and construction data to provide a detailed portrait of a risk. By providing detailed information about a risk, brokers can strengthen their relationship with underwriters and improve their bargaining positions. The insurance industry always has its gaze fixed on the horizon, and we are watching a few risks for the year ahead, including the ebola virus, terror and a more active Atlantic hurricane season. At the time of writing, the Terrorism Risk Insurance Act renewal is in Congressional limbo. At this point, brokers have likely addressed this issue with their clients. But in light of the growing threat posed by groups such as ISIS and Boko Haram, brokers may want to consider standalone terror coverage, especially for clients that truly need such coverage due to lender or investor requirements or locale. For more on what to expect in 2015, download our State of the Market: Property Catastrophe Insights Report. You can also read my interview with Insurance Business America, where I discuss the above topics, plus the insurance industry’s response to the ebola virus’s spread. Have questions? Suggested additions? Chat with us on Twitter (@napcollc).

How to secure greater price reductions in the softening property-cat market

Author SamanthaKimball , 5/9/2014
As detailed in our previous post, we’ve entered a softer market for catastrophe-exposed property insurance, as companies are reducing prices due to an abundance of capital to be deployed and recent profitability. But brokers may be able to secure even greater price reductions for their clients. To do so, you should consider potential ways to restructure the programs, drive carrier competition, and obtain the most complete and accurate data possible for underwriters. Becoming more granular with construction detail can often reduce “modeled expected loss” and drive down prices even further.

What to expect from property catastrophe insurance pricing in 2014

Author SamanthaKimball , 1/14/2014
ZedZap / Foter.com / CC BY-NC-SA
As detailed in our last State of the Market report, the end of 2013 brought downward pricing trends in the property catastrophe insurance market. Now that the calendar has turned to 2014, we’re looking closely at the year ahead. Our executive vice president Bob Marsh shared his predictions with me:
  • Some markets will resist the call for lower rates—especially on CAT-driven accounts
  • By avoiding these markets or bringing in new capacity—especially primary— rate reductions of 5 to 25 percent might be realized.
  • Reductions may be partially based on the rate magnitude and rate history in the current pricing.
Of course, we don’t have a crystal ball and many factors could affect rates and pricing in the months ahead. What do you think the property catastrophe market will look like for the remainder of 2014? Let us know in the comments or tweet us at @NAPCOLLC.