Contributor: Dave Burridge, Head of Property Package, Burns & Wilcox UK

Over the last three years, the Property Insurance market has grappled with double-digit rate increases and reduced capacity. However, as of late, rates are stabilising, and capacity is softening, thanks in part to carriers aggressively re-entering the market.

Rate increases have averaged only 5-10% in 2023—a noticeable decrease from 2020-2022—for most clients within Property and Casualty sectors. Carriers who are confident they can be profitable in the Property space are more frequently developing aggressive proposals to gain or regain market share.

Within the leisure and hospitality industries, many hotels, event firms and restaurants are returning to pre-COVID revenues. Hybrid office environments are here to stay. This specifically impacts city centers of commerce, where offices, and therefore restaurants and other retailers, may not be as busy during the workday as they once were pre-COVID. Mondays and Fridays are noticeably less busy in city centers with many hybrid workplace policies allowing for those days to be work-from-home options.

Inflation and the impact on policy line sizes

Persistent inflation is affecting both clients and carriers; carriers are forced to limit line sizes and inflation is keeping the costs of rebuilds high, thereby reducing client margins.

Unless inflation drops considerably this year, it will soon outpace rate increases. This may adversely impact capacity just as many carriers are actively pursuing more Property business. Based on current economic policies, the expectation is that inflation will slow, but the timing is unknown.

As for reduced line sizes, all sectors are being impacted by this trend – not just the Property market. Added competition means that carriers are less forgiving, notably for high-risk clients or anyone with a history of regular claim activity. The key word for carriers is “profitability”; the premium must work for coverage to be available through any given carrier.

The importance of accurate valuations, speed, and proper coverage

During this period of inflation, accurate valuations are necessary to ensure clients have the coverage they need in case of a catastrophic loss. The value of some properties on the open market today may be 20-25% higher than a year ago. Policies up for renewal may therefore be outdated, putting clients at risk without additional coverage, and brokers at risk for loss of business. This is particularly true for complex buildings due to rising reinstatement costs.

With this in mind it is important for underwriters to provide experience, education and responsiveness.

It should be noted that clients are paying more for just about everything during this “cost of living crisis” and some may be tempted to seek the low-cost insurance option. Brokers should remind them that premium is tied to the quality and amount of coverage, and selecting policies based solely on price could result in a disastrous financial situation in the event of a large claim.

Much of the same moving forward

Rates are not likely to fall anytime soon, but the consistent double-digit rate increases seen in 2020-2022 will likely halt. We expect rate increases ranging from 5-10% in to 2024. Yet carriers won’t abandon their goal of profitability so rate increases may at least remain at a level in line with inflation.

Of course, interest rates often travel on a parallel path with inflation. One impacts the other, but with rates increasing throughout the year, there is short-term concern over the impact on investment results and the economy as a whole. Regardless, economic policies will have an effect on the direction of not just Property Insurance, but other policy sectors as well.

Building on recent momentum despite industry challenges

Burns & Wilcox has grown over the past few years largely because of our ability to remain nimble and function efficiently—even as many of our clients have transitioned to a remote or hybrid working environment. We offer stable, A-rated capacity to help provide long-term peace of mind.

As some carriers re-enter the Property space, our commitment to flexibility and responsiveness continues. So does service and speed. Our experienced underwriters can help. All our underwriters are empowered to make decisions quickly with confidence, and are encouraged to offer direct, personal access. Most have significant experience working in both hard and soft markets.

Finally, our on-the-ground presence allows us to build precise cover to meet needs while supporting healthy, long-term client relationships. Risk management advice is available through a team of experienced surveyors with access to reliable data and resources.