USI: Property Lines with Poor Loss History to See Rate Hikes Up to 150%

According to USI Insurance Services, cat or non-cat property with a poor loss history or risk quality may see rate increases of up to 150% in the first half of 2023.

Source: Reinsurance News | Published on January 6, 2023

IVANS: average premium rates are up

According to USI Insurance Services, cat or non-cat property with a poor loss history or risk quality may see rate increases of up to 150% in the first half of 2023.

With increased deductibles, valuation adjustments, and capacity reductions, the collective property market was expecting some stabilisation in the second half of 2023 or early 2024, according to USI.

However, in the aftermath of Hurricanes Ian and Nicole, a return to a more stable market environment is unlikely in the near future, as global insured losses continue to exceed historical averages.

Insurers are also dealing with decreased supply and increased demand for reinsurance, with global dedicated reinsurance capacity reduced by more than $40 billion in the last year alone, according to USI.

“With minimal new meaningful capacity entering the market from either the insurance or reinsurance side, insurers entrenched within strict underwriting guidelines, and continued scrutiny on underwriting data provided,” it writes.

According to USI, risks with significant exposure to wildfire, named storm, convective storm, and flood will continue to pose challenges in 2023.

It goes on to say that certain industries, such as food, habitation, wood products, recycling, and frame builder’s risk projects, will continue to face pressure to improve risk quality while facing rate increases, limited capacity, and increased deductibles.

USI anticipates that reinsurance treaty renewals will be finalized at rate increases of 20% or more on January 1, 2023, with a limited supply available due to losses, increased exposure basis from raw material costs, and supply-chain disruptions, as well as increased demand from insurers.

Meanwhile, renewals beginning in the second half of 2023 may face a limited supply of required capacity from incumbents as portfolio catastrophic event (CAT) aggregates deplete with little to no opportunity to replace it.

“Insureds will continue to face difficult decisions balancing risk tolerance, third-party insurance requirements, and budgetary constraints,” the firm says.