Softening Property Market Presents Opportunities and Challenges
The commercial property insurance market has experienced a significant shift over the past year and a half, moving from a hard market characterized by high rates and restricted capacity to a softer market with more competitive pricing. According to Michelle Yuko and Jennifer Klassen, EVPs at Amwins Insurance Brokerage, this change began subtly in November 2023 when underwriters started agreeing to changes they previously would have rejected.
The softening market has been driven by factors such as improved catastrophe loss ratios, increased capacity, and a cooling reinsurance market. New entrants to the market, unencumbered by previous losses, have been competing aggressively for business, forcing existing carriers to either undercut their competitors or offer better terms to retain accounts.
While lower premiums may be attractive, brokers are cautioned against prioritizing price over other critical aspects of property insurance policies. Key considerations include terms and conditions, carrier stability, insurance to value (ITV), and coverage specifics based on risk and geographic exposure. The structure of property programs varies significantly depending on the size of the account and its geographic footprint. For large accounts, layering coverage across multiple carriers can diversify risk and prevent overreliance on a single market.
In catastrophe-prone areas like Florida, California, or the Gulf Coast, coverage costs and availability can fluctuate dramatically. Carriers may apply higher deductibles, lower sub-limits, or require specialized risk mitigation strategies. Scrutinizing carriers’ financial ratings is crucial, as some have become insolvent, leaving insureds with uncovered losses.
Amwins brings several advantages to the table, including resources like catastrophe modeling and sophisticated analytics, specialized industry knowledge, access to exclusive markets, and the leverage to negotiate stronger terms and conditions. Their expertise is particularly valuable in complex situations, such as when a longtime client of an unrated carrier became insolvent, leaving a $1.2 billion property account in jeopardy. Amwins’ team worked to validate the property values and improve the risk profile, enabling carriers to offer capacity and retention levels close to what the insured had previously.
As the market continues to soften, brokers have more leverage to structure favorable deals. However, the key to a strong deal lies not just in pricing but in terms, conditions, and structure. By working with a trusted wholesaler like Amwins, brokers can access the expertise, tools, and market leverage needed to secure comprehensive property insurance strategies that balance cost with risk.
