Property insurance has seen a pricing increase in the first quarter of 2022 while coverage has decreased, presenting potential challenges to the market, according to the latest Alliant overview of the market.
In the report, the US insurance broker stated that though rate increases are still the norm, they are not at the same level as seen in earlier quarters.
“Insureds with good risk profiles and in desirable industries classes can often obtain flat to low single digit rate increases, and even the occasional rate decrease, given there is often an abundance of well-priced capacity willing to offer terms,” says the broker.
However, continues the report, insureds with significant loss activity or that have a significant amount of secondary catastrophe peril exposure are often still experiencing high single digit to double digit rate increases, although very rarely at the levels seen in earlier quarters.
Regarding coverage, according to the report, insurers are taking special attention where clients are unwilling to or unable to substantiate replacement cost valuations. In these cases, insurers are taking corrective actions in the form of: prescriptive policy language (scheduled limits provisions), internal valuation adjustments which can drive rate, or reductions in capacity.
Additionally, the report finds that insurers continue to scrutinise manuscript policy language, especially as relates to time element coverage extensions with no known or ambiguous physical damage triggers.
Just like pricing and coverage face certain challenges, capacity and retentions also present their own challenges even though they have kept stable with no changes.
Insurers are carefully managing their capacity mainly on accounts in industries with notable losses, such as forest products and agriculture, and on risks that have significant secondary catastrophe peril exposure, like wildfire or hail.
Finally, pushes by insurers for retention increases has stabilised this quarter following multiple quarters of insurers imposing industry and peril specific minimum retentions – for example $100,000 or $250,000 AOP’s for frame residential, 2% for tornado/hail exposed areas, etc.
Exceptions to this stabilisation are on accounts with poor loss activity where insurers feel that more corrective action is necessary to create a path to account profitability, notes Alliant.
