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Hard Property Market- Toughest in a Generation

Rates Will Continue to Rise Through 2023

By John Davidson - April 3, 2023

Insurance brokers and carriers have started to sound the alarm- this could be the 'hardest' market in a generation for property related risks.

The term 'hard market' is an insurance industry term, defined as, "the upswing in the insurance market cycle, when premiums increase, coverage terms are restricted, and capacity for most types of insurance decrease " (International Risk Management Institute- IRMI). It is referred to as a 'hard' market, as it is hard to place risks and usually comes with large increases in rates.

While insurance markets are often affected by natural diasters, this year we are seeing a confluence of issues that are all hitting at the same time- increased inflation, re-insurance rates, valuation adjustments, and claim costs. For example, between 2012 and 2017 there was one catastrophic loss over over $10B, but over the next five years, there were nine such losses on top of the other noted market pressures- forcing rates to rise. (Insurance Journal: Hard Commercial Property Market to Linger)

Beyond the upward demand on rates, carriers have also recieved pressure to update the 'valuation' or 'insurance to value' (ITV) of real estate properties. In some cases, valuations are off by 30% and with the increase of inflation and cost for (re)construction, carriers and regulators are pushing to update real estate valuations (Insurance Journal).

The American Property Casualty Insurance Association (APCIA) reports that insurance losses were partially driven by inflation above 8%, while costs of construction were up by almost 34% and trade services increased by approxmiately 27% (Independent Agent: Perfect Stom Creates 'Hardest Market Cycle in a Generation')

These factors have all pushed insurance premiums by up to 50% in some cases, forcing brokers and insureds to market accounts and accept higher prices for property insurance risks.

For more information, see the linked articles above and/or contact our company for help with your insurance needs.