As 2024 comes to a close, Gallagher’s comprehensive analysis of the US real estate and hospitality market highlights significant shifts in the property and casualty (P&C) insurance landscape. From property valuations to emerging risks, the report offers insights into the evolving priorities of underwriters and opportunities for insureds.
Property Insurance Market Trends
- Negotiation opportunities: Insureds with well-maintained property valuations are leveraging their positions to secure favorable terms, including the removal of restrictive endorsements.
- Rate changes: While hurricanes Helene and Milton impacted the market, substantial rate shocks were avoided. Shared and layered (S&L) property placements are experiencing the largest rate decreases due to increased competition, particularly from London-based insurers.
- Catastrophe exposure: Risks with high catastrophe exposures that saw steep rate hikes in 2023 are now benefiting from rate reductions, ranging from high single digits to double digits. Single-carrier placements, however, show flat to modest rate increases depending on claims history.
- Emerging secondary perils: Severe convective storms, wildfires, and derechos are reshaping underwriter focus. Previously insulated regions, such as the northeastern US, are now under scrutiny for roof quality and wildfire exposures.
Builder’s Risk Market Insights
- Rate relief: Competition for wood frame placements has temporarily eased rates. However, rising costs for construction materials and labor are exerting upward pressure on premiums.
- Underwriter preferences: While general contractors may favor cost-saving measures like NFPA 13R fire suppression systems, insurers often prefer NFPA 13 systems to ensure both life safety and property preservation.
- Strategic submissions: High-quality narratives and careful construction planning are critical to mitigating costs.
Casualty Insurance Renewal Trends
- Non-habitational assets: Office, retail, and warehousing properties are experiencing stable market conditions, with flat to moderate rate increases.
- Habitational properties: Hotels and multifamily properties face tougher conditions, with underwriters adding exclusions for risks like firearms, sexual abuse, and assault and battery. Structured deductible or self-insured retention arrangements may help larger portfolios manage claims frequency.
Specialty Insurance Segments
- Directors and Officers (D&O) insurance: The D&O market remains soft due to an oversupply of capital, with up to 60 viable markets offering coverage. Innovation is evident in products like parametric triggers for public D&O. However, private D&O pricing remains stable, driven by claims from distressed assets like low-occupancy office buildings.
- Cyber insurance: Despite increasing claims activity, competitive pricing persists in the cyber insurance market. Abundant capacity supports stability, though potential corrections may emerge as claims trends evolve.
- Errors and Omissions (E&O) insurance: Pricing remains stable, with premium growth expected as development activity picks up. The E&O market is narrower than D&O, with only 10-15 insurers providing coverage.
- Crime insurance: Social engineering scams remain a key concern. Gallagher advises clients to review their crime coverage limits to avoid sublimit pitfalls as the market exhibits stable pricing.
Key Takeaways
Gallagher’s report underscores the importance of strategic risk management and detailed submission processes across various insurance segments. Insureds are advised to stay proactive, particularly in areas like catastrophe risk, emerging perils, and specialized coverages, to optimize their insurance outcomes in a dynamic market.