News

News

Property Market Update Spring 2006

According to Business Insurance, property losses in 2004 totaled $27.3 Billion. In 2005, a year with a record setting number of natural catastrophes (including Hurricanes Katrina, Rita & Wilma) property losses were $56.8 Billion, of which approximately 50% was borne by the reinsurance market. What does this mean? In economic terms, demand remains constant – in fact may be on the rise… but supply has diminished considerably….resulting in limited capacity and exponentially higher prices.

Who will it affect? Primarily property owners in areas subject to windstorm, hurricanes, storm surge and flooding. Those located in the Gulf Coast States and Southeast U.S. will clearly be most affected. Owners of older frame buildings with roofs that are not tied-down are most prone to loss and therefore will have the most difficult time obtaining wind insurance at any reasonable cost.

Insurance markets tend to run in cycles, from buyer’s to seller’s markets and back again. The cycles can run from as short as two-three years to as long as ten. While the property market (in general) is relatively soft for properties in non-catastrophe prone areas, those exposed to Windstorm, Flood, Earthquake and Tier one Terrorism are in for a rough ride.

What can you do?

Manage your expectations as to availability, program structure and cost.
Start early – develop a plan for renewing or marketing your property program.
Be sure that your broker prepares a comprehensive submission including detailed underwriting data. Underwriters require more today than ever before.
Carefully consider all markets and access points.
When feasible, meet the underwriters and let them know who you are.
Look at creative ways to assume risk, not only through higher deductibles, but retentions in upper layers of insurance as well.
If possible, bind early before capacity constricts further.