CRE MARKET OUTLOOK: NON-ADMITTED COVERAGE IS NO LONGER THE LAST RESORT
Insureds with hard-to-place risks have become comfortable with the non-admitted market because it offers a viable coverage option
While we anticipate a few more years of hard market conditions, advancements in the non-admitted segment are a win-win-win ….
By Joe Mossbrook
The commercial real estate (CRE) industry is still very much a hard market, as admitted carriers continue to limit their coverage offerings on apartments, condominiums and multi-dwelling buildings. This has left agents to forage for alternative options for their clients, and over the past few years, we’ve seen more and more turning to non-admitted markets. Now, with the influx of opportunities, the non-admitted market is evolving, to everyone’s benefit.
Let’s break down exactly how and why the market is changing—and what it means for agents and their habitational clients.
The state of the industry
Three main factors contribute to the state of the industry: the economy, profitability and catastrophic events. We are seeing wildfires, storms and climate change as a whole impacting the country. No longer is the impact limited to a few states, like California and Colorado—this is now penetrating almost every state.
A great example is the ice storm that hit Texas last year, resulting in billions of dollars in damages. Increased crime in metropolitan areas is another trend that is spurring changes to premiums and coverage eligibility.
These abnormalities are affecting profitability for standard insurance carriers, causing concern and making them less willing to write business. Many admitted markets have reduced their capacity, increased deductibles and limited product offerings. Apartments and condominium owners then face higher premiums or possible non-renewals.
Non-admitted market evolution
As admitted carriers narrow their underwriting approach through smart and tighter guidelines, there are more and more opportunities for non-admitted excess and surplus (E&S) line carriers. Being free from the rules and regulations of admitted markets, non-admitted habitational insurance offers a viable coverage option for agents’ commercial real estate clients.
Non-admitted insurance programs have the ability to use a blend of proprietary forms and ISO forms, and in doing so, can include exclusionary wording when needed. This custom underwriting approach benefits insureds because they now have an opportunity to get coverage for tough risks.
Non-admitted coverage was first viewed as a safety net or last resort for the insurance industry—insinuating that non-admitted markets will write anything. But as the non-admitted segment continues to grow year after year, insureds are becoming more comfortable with this segment as an alternative and sometimes competitively priced option.
What’s more, as opportunities and demand for this type of insurance have grown, good program facilitators are becoming more strategic in their approach, evaluating risk at a higher level. These programs are tapering their appetite to now only write best-in-class business, and their band of acceptable risks are now better in quality.
Because of the significant opportunity, programs like mine are being more selective in what we take on. We and other similar non-admitted markets are experiencing double-digit renewal rate increases and strong new business rates.
What it all means for agents, insureds and carriers
The commercial real estate insurance market evolution brings good news for agents, insureds and carriers. The non-admitted marketplace still makes coverage a viable option for insureds with tough risks—and now, better options are available. Non-admitted coverage no longer has to mean last resort coverage.
Agents should seek out well-credentialed, non-admitted programs for their habitational clients. These programs are targeting business that falls just outside the admitted market—and coverage comes in a close second to admitted offerings. Look for programs that feature a limited or exclusive partnership with an A or A+ rated national carrier, which can offer additional peace of mind for agents and your insureds alike.
While we anticipate a few more years of hard market conditions, advancements in the non-admitted segment are a win-win-win: There are better returns for carriers, higher margins for brokers and more confidence and comfort for insureds—knowing the non-admitted market is here to stay.
The author
Joe Mossbrook is the program director at HabPro Insurance, a real estate insurance provider specializing in package and monoline property for non-coastal apartments and condominiums. Built by NSM Insurance Group, a provider of specialty insurance programs, HabPro is available on a non-admitted basis and is focused on providing competitive coverage to the small to middle-market arena. To learn more, visit habproinsurance.com or contact Joe at jmossbrook@nsminc.com.
