Operating in a market where premium
increases are moderating from major hardening of a year ago
[T]here are still likely potholes ahead. What is certain is that strategic layering,
tech-driven storytelling, and creative risk solutions are no longer luxuries—they’re necessary tools of the industry.
By Michael Wayne
In March 2024, Bill Chepulis, Head of Large Casualty, Zurich North America, stated, “I do think that we are in a better place than 12 months ago, and I can see progress on the market being more receptive to changes in price and structure for the sake of long-term sustainability. Those adjustments will lead to broader progress, but it will take time.”
Just maybe, we are approaching “broader progress” when it comes to the stabilization of the commercial property market.
As we continue to navigate the Atlantic hurricane season and wildfire threats in the western U.S.—and other areas—many renewals with favorable loss histories are expected to see single-digit rate increases, while non-catastrophe-exposed assets with good loss histories can expect flat to 10% rate increases.
Compared to previous years, the market is stabler, with premium increases moderating from the major hardening we experienced a year ago. Increased competition and new capacity are helping as well, leading to better underwriting practices and reduced rate volatility.
Here are five strategies you can employ to navigate the stabilizing commercial property market.
Mitigate your clients’ concentration risks. When it comes to clients that maintain multiple properties or facilities, it matters if those locations are clustered together or if they are distanced from each other.
Overwhelmingly, underwriters frown upon seeing a client’s portfolio with multiple locations in the same wildfire zone, the same floodplain, or in the same earthquake zone. You can alleviate carrier concerns by diversifying coverage. Mix up retention levels. Enlist a small captive program to absorb the first layer of loss.
As your efforts help your clients grow, remind them that their expansion strategy should include area diversification when it comes to location, if that’s a possibility.
Strongly consider parametric and alternative solutions. Even if the coverage gap you are trying to cover is traditional, that doesn’t mean your solution to take care of that gap has to be. A small parametric “trigger-and-pay” policy—say, a defined wind-speed threshold—can bridge a deductible or plug a limit shortfall.
For those uninitiated, a parametric solution, at its core, covers the probability—if not likelihood—of a loss-causing event, instead of indemnifying the actual loss from the event. There is a pre-defined intensity threshold that is met or exceeded as measured by an objective value—a parameter.
With a larger, more complex account, finite-risk deals or collateralized reinsurance can help level cash-flow peaks and valleys. These options build rapport with carriers because they show your goal is to solve issues, not simply pass them on.
Show carriers high-tech surveys. We’re living in a data-driven world, and underwriters love hard data. If you’re still putting together hand-written walkaround reports to submit that’s fine, but you need to augment that using the technology that is available to you.
Drones make it possible to get photos and videos from virtually every angle, get thermal scans that pinpoint insulation leaks, highlight areas in need of improvement, and allow a more complete action plan to be put together to remedy issues.
From a carrier’s perspective, you’re showing that you are serious about having your client take care of their property, and that could translate to receiving a more favorable rate.
Tell a compelling loss-control story. In math, we all heard the term “show your work.” In this instance, you need to show your work with a gripping narrative. Tell your client’s improvement story by delving into what the property was like previously, the improvements that you have implemented, and how those improvements have made an impact.
You don’t need to write a novel. With just a few paragraphs and some real-world examples, you can provide a clear and concise vision of not only the before and after, but of the yet-to-come.
Layer smartly across admitted, surplus, and captives. Your coverage tower should be like a sandwich: the soft, broad-form admitted layer on top; the flexible, gap-filling surplus piece next; and your captive or risk retention group filling at the base. That way, you capture all the benefits of admitted markets—like state guaranty funds—while still plugging holes where appetite has dried up.
Be vigilant. Each part of this sandwich has its own expiration date (renewal date). You must be proactive. You also need to be practical. While it is great to have “nice-to-haves” in plans and solutions for clients, it’s even more important to have achievable goals that show your client’s continuous progression.
While the path forward looks more navigable than last year, there are still likely potholes ahead. What is certain is that strategic layering, tech-driven storytelling, and creative risk solutions are no longer luxuries—they’re necessary tools of the industry.
The author
Michael Wayne is a freelance insurance writer.
