As the property insurance market ended 2019 and headed into the first quarter of 2020, it saw a steady firming trend that carried on from February of last year. Underwriters were capturing rates as they moved pricing, terms, and conditions closer to what the industry’s technical underwriting standards imposed.
The previous calendar year brought a return to underwriting profitability following significant industry losses in 2017 and 2018. However, entering this year, underwriters in the property insurance market worked to maintain the solid momentum, and first-quarter property renewals saw average rate rises in no losses and cat exposed categories.
But while the market was seeing a significant and strong rise, it came across an unprecedented attack: COVID-19. Like all other industries, the property insurance market was not immune to its effects.
The Impact of COVID-19 on Property Insurance
The spread of the coronavirus has completely changed the way we work, live, play, eat, and so on. The pandemic brought into question how property insurance policies should respond to certain unprecedented measures or “black swan” events, and impacted how underwriters in the industry are approaching renewals and new business.
What was already a challenging market to navigate and hold steady growth quickly accelerated to a hard market.
While it will take months—or even years—to determine how property insurance policies will respond in the long-term to physical damage and business interruption claims resulting from the coronavirus, the impact of the pandemic is already making waves in the renewals that are currently underway.
The coverage changes in property insurance policies directly connected to the virus have seen a tightening of contamination exclusions, adding exclusions for infectious diseases, or significantly lowering limits of those insurance policies that do provide some coverage.
A more important impact that’s directly tied to COVID-19 has been on the underwriting process itself. With underwriters and their modelers now working from home—and expected to work remotely moving forward—the process and flow have seen a slowdown.
A Breakdown of the Industry
The conditions that accelerated in the second quarter of the year are not tied to the pandemic itself but are a symptom of the retrenchment that develops in unstable times like these.
Many carriers are cutting back on the capacity being offered at renewal when it comes to insurance capacity. Some insurance carriers have completely stepped out of the market as others are exiting industry classes or occupancy types. This all directly impacts renewal pricing in the end.
Some underwriters are not renewing accounts within particular industries, including high-tech, food, schools, recycling, auto dealerships, and chemical risks. These industries are seeing the most severe cutoffs in carrier capacity and rate hikes.
And lastly, when it comes to deductibles, the pressure is playing a role in increasing deductibles across most business classes. Some insurance carriers in the property market impose minimum deductibles in certain classes and convert flat dollar deductibles. Underwriters are also looking to raise deductibles to eliminate attritional losses.
While no one can predict the market in terms of how it will ultimately respond to the ongoing pandemic, the industry is different now and will potentially shift moving forward. Carriers in the industry need to set realistic expectations for the stakeholders and begin looking at renewals earlier. The process is expected to take longer, and time and preparation are needed.
About Genesee General
At Genesee, we strive to provide quality insurance solutions for the Commercial E & S sector, and we can help with your small, middle market and large excess and umbrella accounts. Our longstanding expertise has allowed us to successfully serve your clients for over three decades. Our specialized products include coverages for Transportation, Garage, P & C, Professional, Brokerage Property, Specialty Programs and many more. For more information about our products, we invite you to contact us today at (800) 282-8755.