Nonprofit & Human Services
Rate increases for nonprofits accelerated in the second half of the year, particularly for property insurance. Catastrophe (CAT) events brought over $150 billion in property losses in 2023, which impacted pricing.
Private equity (PE) deals and exit activity dropped by around 30% in 2023. Uncertainty around rising interest rates prompted firms to be cautious, temporarily pausing larger deals in favor of smaller ones. Larger deal activity might pick up once the interest rate environment stabilizes.
Social inflation and increased costs of defense continue to drive small rate increases, but the professional liability (PL) market is softening. Firms with favorable loss histories — along with a willingness to approach alternative markets and provide detailed underwriting submissions — should not experience rate increases and can even hope for a slight rate decrease. In 2024, Risk Strategies expects continued competition to lead to more favorable terms and pricing, particularly for firms with good risk profiles.
Across the real estate landscape (including commercial, habitational, hospitality, retail, and other) concentrated risk in catastrophe (CAT)-prone areas is driving up property insurance pricing. High demand for new buildings and rapid growth within condensed geographic areas increase exposures. This makes it difficult for carriers to cover losses if disaster strikes. Concentration of risk is intensifying the hard market across the entire nation, affecting coverage availability and cost. The surge in demand for senior housing in CAT-prone regions exacerbates the situation.
Insurers are updating construction valuations by 5% to 15% and adjusting total insured values. Premiums are increasing, driven by rate hikes and increased property values. Assess your safety and loss control protocols to secure favorable terms. Prioritize life safety systems such as older building sprinkler retrofitting, and roof replacement. Use non-combustible materials in new construction.
In 2023, policies with underperforming loss ratios saw additional rate increases of 10% to 15% (or more). Significant causes of loss, such as mold and mildew remediation, have resulted in further coverage reductions for those with disproportionate levels of this loss type. In addition, 2023 saw a 12% to 15% decrease in relocation volumes vs. unusually high volumes in 2022 that were the result of pent-up demand from the COVID-19 pandemic. Reduced shipment volumes allowed service providers to refocus on service quality in order to recover from both staffing and capacity shortages that had contributed to increased loss frequency and severity from the previous year.
For 2024, we expect modest 3% to 5% growth for the global relocation industry and a return to historical shipment volume patterns supported by experienced and highly qualified crews.
Commercial transportation continues to grow, but challenges have arisen due to an increased demand for last-mile deliveries during a labor shortage. The transportation industry remains a hard market. Specific risk factors continue to fuel premium increases, with physical damage hitting +20% to 25% and umbrella liability +25% to 100%, as well as auto liability rising even further to 20% to 25%.
Waste & Recycling
The insurance market for waste & recycling companies has proven to be challenging across most coverage lines due to limited capacity and increased claims frequency and severity. Factors such as the frequency of auto liability and physical damage claims, nuclear verdicts, and high workers' compensation rates have led to limited capacity, double-digit rate increases, and a very difficult market for Excess Liability. Carriers are requiring higher attachment points and often limiting their capacity.