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For many associations, insurance premiums are the largest overhead cost, so it’s very important to accurately forecast any changes for the coming year. Each year, we review market conditions and trends that may impact your insurance renewal premiums, providing you with an educated look at how they may increase or decrease your association’s budget. Below, we are breaking down what you can anticipate for the remainder of 2019, including current renewals, and as you begin the budget planning process for 2020.
Property/Hazard Insurance Rates:
For the past several years, beginning in 2014 and continuing through 2018, we have generally experienced decreasing property premiums and improved coverage terms. This type of environment is known as a “soft” market. By the end of 2018, the property market began to show signs of firming. That continued into the first quarter of 2019. This trend has continued through the second quarter and appears to be accelerating more significantly than initially expected.
Adverse loss development from recent catastrophic events and an increase in the cost of reinsurance have been catalysts for this acceleration. Two consecutive years with combined loss ratios exceeding 100% has heightened the focus of management and underwriters to reduce aggregate exposure and increase rates.
In addition to rate increases, we are witnessing tightened risk selection, reduced capacity, increased deductibles, and policy form revisions. Some carriers are approaching New Business and Renewals differently and might be more aggressive offering a New Business quote vs. a Renewal quote, for essentially the same risk. Insurance carriers are utilizing a level of underwriting discipline we have not seen in a while.
- At this time, our recommendation would be to budget for an increase of 10% to 30% for rates, and 5% to 10% for appraisal increases.
- For coastal communities with losses and/or older structures, you should anticipate an increase on the higher end of this range.
Ancillary Coverage: (General Liability, Crime, D&O, Excess Liability)
We continue to expect these lines of coverage to remain relatively “flat” with the exception of General Liability and Umbrella. Due to adverse loss experience (severity and frequency), compounded by water damage subrogation claims from Personal Lines carriers, some carriers are pricing themselves out of this market. Others are adding restrictive endorsements, such as a Weapons/Firearms Exclusion, which basically forces agents to move carriers.
- We recommend that you budget for a 10% premium increase for General Liability and Umbrella.
Flood Insurance Rates (NFIP):
As of April 1, 2019, there were changes to the NFIP that will affect both new and renewal policies.
- Base premiums will increase an average of 7.3% after surcharges and fees. (As always we caution not to use this 7.3% to estimate any specific policy increase as this is an average of the NFIP’s many varying rate increases and policy types.)
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