Commercial property rates have seen double-digit increases for two straight years and Gary Wells, managing partner at The Liberty Company Insurance Brokers, does not foresee a notable drop any time soon.
The 2022 outlook for this segment is still quite uncertain as severe weather events continue to present challenges for carriers, brokers, and clients.
“We are still going to see increases, but it won’t be as high as we have experienced over the last couple of years,” he stated.
Another challenge Wells mentioned was the lack of capacity in the industry, especially for property driven accounts.
“During the pandemic, there were many people who couldn’t pay rent as they were receiving less revenue,” he noted. “Couple that with shortages on labor and materials, and insurance carriers requesting major increases on insurable values – those three things combined are really affecting commercial real estate clients.”
Wells deals with multifamily properties and explained that properties in states like Texas and Florida have been particularly hard to handle as carriers are pulling back the amount of capacity they are willing to have in those areas based on weather-related exposures.
“As far as how to help clients mitigate increases, multifamily properties are the most challenging,” he emphasized. “We’re having to increase deductibles to keep pricing down as much as possible.”
Brokers can make multifamily properties more favorable to carriers by presenting proof of regular site inspections and actively eliminating any weather exposures that can create a loss.
Carriers have been using more tools to manage liabilities that can stem from severe weather events, such as wildfire or flood mapping, or even crime scoring – all of which are “tools that were not available four to five years ago,” according to Wells.
“A lot of business is moving to the excess and surplus (E&S) market for specific areas like Texas where there were billions of dollars in losses [in recent years], so we’re seeing programs popping up in specific geographic areas, and products will be priced according to unique exposures,” he explained.
“In a lot of areas, we’re able to paint a picture to carriers based on loss history and risk mitigation strategies. Over the last two years, we’ve seen a large spike in kitchen fires in apartments with more people at home cooking for themselves, so we recommend clients look at what they have in place to put fires out quickly.”
Slips and falls are another exposure that impacts commercial properties and Wells added that there has been even more scrutiny from carriers, especially when it comes to liability coverage.
“I think as long as we move out of the pandemic and the liability exposure drops, there will be more carrier capacity this year,” he said.