Insurance broker Aon says insureds can expect commercial property rates to continue their modest rise through the first half of 2013, with Superstorm Sandy victims bearing the brunt of that increase.
In its report, “2013 U.S. Insurance Market Overview: Year in Review and Forecast Property,” Aon says accounts can expect rates to rise up to 10 percent. Property risks without Gulf of Mexico and East Coast exposures can expect flatter rates and possibly some modest market competition for non-catastrophe-exposed business.
Rates were up 2.8 percent in 2012 compared to 2011, the report notes, and national accounts rose 5.3 percent because they tend to have higher natural-catastrophe exposures. National accounts have experienced rate increases for slightly longer than the rest of the property market—a total of six quarters compared to only five for all property risks.
Aon says most accounts saw little change from the previous year in terms of limits, deductibles/retentions, coverage and capacity. Accounts can expect little to change this year except for flood and wind coverage and contingent business interruption (CBI): Insurers will closely scrutinize limits for both flood and CBI and will work to clarify language surrounding flood and wind coverage. While capacity should remain adequate, insurers will be more circumspect in their flood-insurance offerings.
The report notes that global insured catastrophe losses in 2012 came in at $65 billion, with Sandy adding significantly to the total by approximately $25 billion. More than 90 percent of last year’s insured losses came from the United States. While 2012’s global losses were about 50 percent lower than 2011, the losses rank considerably higher than the average for the past 10 years.
Responding to questions, Mike Andler, managing director of Aon Risk Solutions of the Greater New York Property Brokerage Group said in an e-mail that some underwriters with significant flood risk on their book will seek to reduce their exposure while those with capacity will pursue expansion, but the price will hinge on the cost of capital.
Underwriters will be examining whether storm surge belongs under the definition of windstorm or flood, Andler continued. If market pressures lead to pushing the coverage under flood, then clients may need to increase their flood limits.
“There is no danger of finding coverage at this point, the market will respond if an increased need for [flood] limits occurs,” Andler said.
Updated: 5:16 p.m. with comments from Mike Andler.