Hurricane Ian’s impact on the 2023 property market and what that means for your business

In the new year, reinsurance pricing and availability remain key concerns for the property market, especially after Hurricane Ian struck the coast of Florida. Several carriers exited or partially withdrew from the market in 2021 and 2022, even before Hurricane Ian hit, due to the difficulties between supply and demand. “The imbalance of supply and demand in property catastrophe drove a stressed market and, in some cases, led to pricing and structural changes unsupported by technical considerations. While conditions warrant a market correction, not all outcomes were logical or sustainable,” said Jennifer Ainslie and Paul Caricone, Guy Carpenter.

Hurricane Ian has inevitably amplified the concerns about insurers’ capabilities, and they have started to cut capacity due to this devastating event. Globally, there will likely be a $25 billion to $50 billion shortfall in capacity. At least $20 billion of property catastrophe capacity is likely needed in the U.S. Rising inflation means most insureds will try to purchase 10% more in reinsurance limits to stay afloat.¹ Along with the limited carrier options for reinsurance capacity, underwriters have also been challenged; they will start to find that the typical approach to the marketplace will not garner the best results.

While Hurricane Ian had a devastating impact on Florida, it also had a direct impact on the 2023 property market as a whole. Those who live in less catastrophe-prone areas should be aware of how this will continue to affect them. All risks will be subject to valuation discussion, which will drive up premiums since exposures are becoming more challenging. Hurricane Ian’s impact will likely drive a rate increase of up to 20%, but several other sources have predicted rate increases of 40% - 60%. ² This depends on how insureds managed their portfolios before this inflation. As a result, this leaves many agents hesitant to have difficult conversations with clients about potentially massive increases. Unfortunately, this leaves insureds with little to no alternative choices when they are presented with extremely large premium increases. 

Agents and brokers need to be proactive 

Agents and brokers need a more creative approach to the market to combat this growing problem and should consider offering proprietary solutions, captive options, or parametric insurance solutions. A broker well-versed in parametric insurance could ensure your company’s financial safety through future catastrophes or unprecedented rate increases. Parametric or index-based solutions offer fast and transparent claims and the ability to payout without actual physical damage to an asset and set up a pre-agreed payout if the parameter threshold is reached or exceeded.³

Agents can also help by proactively obtaining updated appraisals before the renewal starts. Underwriters are more likely to consider submissions that are the most up to date with their valuation data. Since current data enables carriers to price coverage more accurately, this will set clients up for the right coverage if an occurrence happens.

During these uncertain times in the marketplace, it is critical to have a trusted broker behind you with the resources needed to get you the best rates. Marsh McLennan Agency understands the current industry trends and risks and has the solutions needed to help you comprehensively evaluate your business demands. 

Sources:

¹ARTEMIS

²The Insurer

³Swiss Re Corporate Solutions