Page 5 - 2016 State of the Market from AmWINS

AmWINS State of the Market | 35

LINES OF BUSINESS

PROPERTY

Absent a major catastrophic loss, the market
is poised to remain soft

Although no one wishes for a catastrophe, “Two exceptions where we are seeing Recent months have seen the entry of
the fact remains that it would require a signs of rate stabilization are accounts several new players in the E&S market,
significant catastrophic event – or two – to that have suffered loss frequency or including Velocity Risk Underwriters
shift the deeply entrenched conditions in severity and situations where an insured (VRU), Navigators, Ventus and Arrowhead
the property marketplace. In a recently values carrier continuity over continual Specialty (as a new player in the wind
published report, Fitch Ratings predicted it carrier churn,” says Harry Tucker, market, supplementing its large presence
would take storm losses equal to 15 percent executive vice president and national in quake). The market continues to feel
or more of the industry’s aggregate surplus property practice leader at AmWINS pressure from standard lines carriers as
of roughly $670 billion to change conditions. Group, Inc. well. Depressed rates for clean business
have forced standard carriers to seek
Just how benign has the loss experience Additionally, some insureds investing opportunities in classes that, in a more
been? By any measure, the period since premium savings to reduce their robust market, would be placed with
Hurricane Katrina in 2006 has been deductible exposure and/or broaden their E&S insurers. Examples include frame
remarkably quiet when it comes to major coverage. “We are seeing insureds utilize restaurants, non-sprinklered buildings, and
catastrophes. Over the past 100 years, a premium reductions to acquire additional accounts with sub-par loss experience.
hurricane has made landfall in Florida more wind, flood, or earthquake limits, buy
than once every two years, yet only one down their deductibles to provide balance As an indicator of just how soft the market
hurricane has struck over the past 10. sheet protection, and secure broader is, there is strong carrier support for
While a number of factors are responsible – overall coverage through manuscript multifamily/habitational business, most
including a trend of storms forming further forms,” says Bob Black, executive vice notably apartment management firms.
east, elevated sea surface temperatures president and property broker at AmWINS Multifamily accounts were a difficult
in this area, and an increase in vertical Brokerage in Atlanta, Georgia.
wind shear (low wind shear is conducive Source: AmWINS property lines account data
to hurricane development) – there is
no consensus among experts as to the
potential persistence of this trend.1

This absence of any major catastrophes,
combined with new capacity from
traditional and alternative capital sources
entering the property market, has resulted
in continued soft pricing in 2016. Non-
catastrophe rate reductions generally
range from the single to low double-digits,
while catastrophe rates many times face
enhanced downward rate pressure.

1 Renaissance Re / Weather Predict Consulting