Many clients with January 1 renewals may have missed the full impact of Treaty changes. The burden now falls on those accounts that renew after January 1. Some new capacity entered the market capitalizing on better pricing and terms but not enough to slow the market down.
For all but wood frame/joisted construction projects, the builders risk market is still competitive. Favorable pricing, terms and conditions, and capacity are readily available for high-quality construction projects in the non-CAT retail market. The excess & surplus (E&S) market responds well to frame/joisted projects. Both retail and E&S markets respond well to mass timber/cross laminated timber projects.
Water damage losses continue to grow in size and frequency in construction projects as well as existing high-rise, healthcare, multifamily, and other buildings. Underwriters are imposing higher water damage deductibles and reducing water damage limits. They are even mandating the purchase and installation of water detection devices for early alerts of water leakage.
Underwriters continue to have limited appetites for certain occupancy types such as food, habitational, wood products, and recycling operations. Deals come together at a cost with lower limits and higher deductibles.
A recent building appraisal analysis showed that nearly 90% of buildings appraised in 2020 and 2021 were undervalued. As a result, 68% of buildings were underinsured by 25% or more and 19% were underinsured by 100%. Underwriters continue to focus on the adequacy of replacement cost values amidst inflation, higher labor and material costs, and supply chain issues. Underwriters may look for building and contents value increases as high as 10-20%, which translates to higher insurance premiums.
Unless clients take steps to increase their property values to today’s dollars, underwriters will impose coinsurance, remove blanket occurrence limits of liability, and apply limits per location among other things. Claims adjustments can be difficult too if the loss measurement is higher than values reported at a location.
Rate disparity between good risks without CAT and poor risks with CAT will continue in 2023. Good quality risks without CAT exposures and losses will see rate increases, on average of 10% while poor risks with CAT and with loss experience will see increases of 50% or more.