Business Insurance reports that commercial property and casualty insurance rates are rising. In the fourth quarter of 2019, MarketScout Corp. also showed increased rates for commercial property, professional liability and D&O liability. While their reports represent national averages, some areas of the country are seeing much steeper property increases.
Although many factors contribute to the current insurance landscape, recent natural disasters have had an undeniable impact on the property market.
This is part of a trend that is not expected to reverse anytime soon. Most experts expect insurance rates and deductibles to continue rising throughout 2020.
The Realities of a Hard Market
Rising rates aren’t the only trend worth noting in commercial property insurance.
A hard insurance market is the opposite of a soft insurance market. During a soft market, rates are lower, high limits are available and insurers are eager to write more policies. During a hard market, rates increase, high limits are harder to find and insurers are hesitant to write more insurance policies. Underwriting becomes stricter, and coverage may be limited.
The current market shows clear signs of hardening.
Natural Disasters Are Largely to Blame
Soft and hard insurance markets typically go in cycles, and many factors contribute to the hardening or softening of the market. However, natural disasters appear to be a key element in the current market conditions.
The National Centers for Environmental Information says that 2019 was the fifth consecutive year in which the United States experienced 10 or more natural disasters causing at least $1 billion in losses. This is unusual. In the last 40 years, only four other years had 10 or more natural disasters with $1 billion or more in losses. In 2019, there were 14 such events, including three floods, two tropical cyclones, eight severe storms and one wildfire.
These natural disasters have a significant impact on insurers. Particularly in high risk areas, insurers are offering less coverage, raising rates and cancelling some policies. While much of the focus has been on homeowners, businesses are also feeling the impact.
In a hardening market, it’s very important to get prepared four to six months prior to your insurance renewal. Take steps now to make your commercial property a more attractive underwriting risk. Invest in loss prevention enhancements and training, update policies, review vendor contracts and contractual risk transfer opportunities and review any open claims. Higginbotham Insurance is here to help. Contact your agent for assistance.