Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.
The property insurance marketplace continues to be a challenging segment in 2023. With catastrophic events that have occurred over the last several years such as hurricanes, floods, wild fires, and major storms, the property marketplace has taken a huge hit that will take many years to recover. As a result, we expect property pricing to continue increasing for the foreseeable future. There are several real-world examples of the property market hardening.
Insurance carriers are paying much more attention to the geographic diversity in their portfolios. In many cases, insurance companies are pulling out of areas of concern, such as wild fire or flood prone areas. More and more policyholders are receiving non-renewal notices as insurance carriers expand their hazard zones. This also has an adverse effect on those seeking property coverage because it limits the number of insurance carrier options.
Underwriters are also beginning to pay closer attention to the condition of the properties they currently insure or plan to insure. In the commercial property segment, loss control visits are becoming more frequent for buildings of all sizes. Loss control specialists will focus their attention on the state of the buildings, and the status of building updates such as electrical, plumbing, roofing, etc. More specifically, loss control specialists are even analyzing the age and brand of electrical panels. There is one brand of electrical panels called Zinsco that experts recommend replacing immediately due to fire hazard. Therefore, if a building is still equipped with a Zinsco panel, it is likely that these panels will need to be replaced before an insurance company will be comfortable providing terms and pricing.
Another sign of the deteriorating property market includes the recent announcement that California Insurance Commissioner Lara will increase the FAIR Plan coverage limit for commercial buildings from $8.4 million to $20 million. This is a direct result of insurance companies pulling out of areas that are deemed high hazard. This limits the number of insurance companies available to write property policies in these areas and in some cases there are no options at all. Therefore, in the case of a commercial building owner who has exhausted all options, they could fall back on the FAIR plan to secure coverage.
To combat these rapid changes within the property market, it is critical to meet with your broker and review each policy in detail. Discuss those areas that could be impacted, look at increasing values, additional safety measures and controls, make sure your coinsurance percentage is still in line with rising costs. Being proactive and looking closely at how you can perhaps upgrade your building with cost effective loss control measures could be the difference in securing a competitive quote.
To discuss your property coverage, contact me at (619) 937-0174 or via email jhoolihan@ranchomesa.com.