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 2022.
Property:
- Property rate pressure continues to trend upward as we progress through 2021 and the trend is expected to continue. Some are of the opinion pricing, in certain lines, will peak in 2021, which would perhaps be a silver lining.
- Carriers continue to pursue increased rates and higher percentage wind/hail deductibles in Cat exposed areas.
- For 2022, property rate increases are likely to continue in the range of +/– 10% to 30%. Property loss history, valuation, location, age, etc. will play a role in the actual increase.
- Catastrophe, attritional losses and the uncertainty surrounding COVID-19 are just some of the factors contributing to the continued rate pressure we are experiencing.
- The magnitude of these increases vary by the class of business, age, condition, loss history, and current rate adequacy of the account.
- The insolvency of American Capital Assurance Corp, in May 2021, has caused additional pressure on other Property markets.
- This “hard” market has forced some insureds to take larger deductibles, fewer coverage enhancements, as well as, program restructuring, in order to offset the increased cost for insurance
Primary Casualty/General Liability:
- Guidance for General Liability rates is +10% to 30%.
- Carriers are seeing higher frequency, severity and attritional losses in this space. Some are no longer writing new business, others are increasing rates and restricting coverage terms.
- Water Property Damage Subrogation claims continue to be a contributing factor.
- Underwriting scrutiny has increased and carriers are requiring more years of Loss History and mitigation efforts to avoid potential future losses.
Directors & Officers Liability:
- Guidance for Directors & Officers Liability rates is 10% to 15%
- After two years of increased pricing, we continue to see increases but at a lower rate.
- It will take some time for the claims impact related to the building collapse in Miami to develop. However, D&O litigation continues to increase in other areas including environmental, social and corporate governance (ESG) practices, and cyber risk management.
Umbrella/Excess Casualty:
- Guidance for Umbrella/Excess Casualty rates is +/– 15%
- Social inflation continues to provide disruption. In addition, the recent collapse in Miami is sure to have an impact and increase pressure in this space. As a result, we expect to see increased hardening in this market.
- Risk Purchasing Group programs continue to dominate this space. Restructuring of these programs is becoming necessary due to higher loss frequency, severity, and the participating carriers are pulling back on capacity.
Flood:
FEMA’s Risk Rating 2.0 rollout is now underway as the agency announced April 1st that NFIP flood insurance policyholders will see a new system calculate their premiums. Risk Rating 2.0 is a new pricing methodology from FEMA for flood risk. It is designed to better reflect a property’s unique flood risk while also providing rates that are easier for agents and policyholders to understand. It will use the latest actuarial practices to set risk-based rates, allowing consumers to make more informed decisions about flood insurance.
What is changing:
To make the changes more equitable, FEMA will look at detailed flood risk variables such as distance to a water source, flood frequency, flood types, and property characteristics like the cost to rebuild and elevation.
What is not changing:
- Setting limits on rate increases. Risk Rating 2.0 maintains limits on rate hikes. Rates may not increase by more than 18% per year.
- Utilizing flood mapping. Risk Rating 2.0 will continue to use FIRMs to assess the flood risk, rebuild requirements, floodplain management strategies, and see if a location’s flood insurance is mandatory. FIRMs also remain as tools for creating flood management policies.
- Offering discounts. Finally, Risk Rating 2.0 keeps features from the original risk ratings, including premium discounts for pre-FIRM subsidized and newly mapped properties. The discounts for participation in the Community Rating System continue to apply.
NFIP will roll out Risk Rating 2.0 in two phases:
- Phase I. Risk Rating 2.0 starts for new policies beginning on October 1, 2021. Renewing policyholders may see discounts on their premiums.
- Phase II. Policies with renewals on or after April 1, 2022, will price according to Risk Rating 2.0.
If you have any questions, please do not hesitate reach out to your Gulfshore Insurance Client Advisor who can offer assistance. We are here to help.
Gregory Havemeier, CIC, AAI, CIRMS is a Client Advisor and Partner at Gulfshore Insurance specializing in community and condominium associations. Gregory works with a wide range of business clients to deliver strategic risk analysis and guidance. Comments and questions are welcome at ghavemeier@gulfshoreinsurance.com
FEMA’s Risk Rating 2.0 rollout is now underway as the agency announced April 1st that NFIP flood insurance policyholders will see a new system calculate their premiums. Risk Rating 2.0 is a new pricing methodology from FEMA for flood risk. It is designed to better reflect a property’s unique flood risk while also providing rates that are easier for agents and policyholders to understand. It will use the latest actuarial practices to set risk-based rates, allowing consumers to make more informed decisions about flood insurance.
What is changing:
According to FEMA, the current NFIP pricing methodology has led to policyholders encountering average premium rate increases of $8 per month each year at renewal. After incorporating additional flood information and variables into the pricing methodology, FEMA provided that Risk Rating 2.0 will have the following impacts on current NFIP policyholders’ premium rates:
- Nearly a quarter (23%) of policyholders will experience premium rate decreases.
- Two-thirds (66%) of policyholders will encounter moderate premium rate increases.
- The final 11% of policyholders will experience more significant premium rate increases.
To make the changes more equitable, FEMA will look at detailed flood risk variables such as distance to a water source, flood frequency, flood types, and property characteristics like the cost to rebuild and elevation.
What is not changing:
- Setting limits on rate increases. Risk Rating 2.0 maintains limits on rate hikes. Rates may not increase by more than 18% per year.
- Utilizing flood mapping. Risk Rating 2.0 will continue to use FIRMs to assess the flood risk, rebuild requirements, floodplain management strategies, and see if a location’s flood insurance is mandatory. FIRMs also remain as tools for creating flood management policies.
- Offering discounts. Finally, Risk Rating 2.0 keeps features from the original risk ratings, including premium discounts for pre-FIRM subsidized and newly mapped properties. The discounts for participation in the Community Rating System continue to apply.
NFIP will roll out Risk Rating 2.0 in two phases:
- Phase I. Risk Rating 2.0 starts for new policies beginning on October 1, 2021. Renewing policyholders may see discounts on their premiums.
- Phase II. Policies with renewals on or after April 1, 2022, will price according to Risk Rating 2.0.
Click here for additional information on FEMA’s Risk Rating 2.0.
Joe Thompson is a Client Advisor and Partner at Gulfshore Insurance who specializes in managing risk for community associations and various contractors. Comments and questions are welcome at jthompson@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in business insurance including liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, and more. Our insurance and risk management advisors are industry specialists for condominium associations, golf and country clubs, oil and petroleum marketers, construction, landscaping, churches and non-profits, and work comp. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
Property insurance rates are on the rise with insurers reporting $1.6 billion in losses last year. And one of the biggest drivers of rate increases is the extraordinary number of roofing claims in Florida. Florida lawmakers are hoping legislation passed recently will help lessen the blow, but even with the proposed changes, rates may likely keep increasing in the short term.
The recently passed legislation clarifies insurance coverage related to roof damage and replacement; creates a uniform period for filing a claim; requires the insured to notify the insurer before filing a lawsuit; and changes how attorney fees are handled in litigation.
The bill allows insurers to offer homeowners policies that adjust roof claims to actual cash value if the roof is older than 10 years and allows property insurers to offer homeowners the option of purchasing a stated value limit for roof coverage. It also creates a uniform two-year period for filing a property claim, supplemental claim, or reopened claim, versus the current three-year statute of limitations in Florida.
Under the bill, insurers must be notified of claims in detail and given sufficient time to inspect properties before lawsuits are filed.
The bill also changes how insurers are obliged to cover insured’s attorney fees. Whereas currently insurers must pay a fee even if the insured only recovers a small amount, the new legislation means insurers’ obligations will be directly related to how successful the claim was and sets out a “strong presumption” that fee awards should be limited to a reasonable lodestar fee structure.
The legislation is now awaiting the governor’s signature, and we will continue to keep you updated. If you have any questions or concerns regarding this information, please contact us. We are here to assist you and happy to answer any questions you have.
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, home and homeowners insurance, car and auto insurance, boat and yacht insurance, property insurance, umbrella insurance, valuables insurance for fine art, jewelry, wine, and more. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
For many associations, insurance premiums are the largest overhead cost, so it’s very important to accurately forecast any changes. 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 impact your association’s budget. The Florida condominium marketplace has tightened substantially over the past few months and may tighten further in the near future as a result of several developments happening simultaneously. These developments include but are not limited to the following.
- Everest is in the process of completely exiting the admitted and non-admitted condo marketplace in Florida.
- Weston is in the midst of non-renewing hundreds of condominium policies.
- NSM’s (CHAMP) current focus is on condominiums with TIVs less than $25M (seeking limits up to $30 million) through Renaissance Re as Lexington (which had much higher capacity) is non-renewing all policies starting February 1st 2021, where in the past they had also focused on TIVs in excess of $25M. This change is likely to impact hundreds of condominium accounts. Also, rate increases of at least 25% are being quoted.
- As of April 14, 2021 American Capital Assurance Corp. (AmCap) is officially in receivership and is in the process of being liquidated. With the exception of the flood insurance coverage issued by AmCap, the company’s insurance policies are cancelled effective 12:01 a.m. on May 14, 2021, unless otherwise terminated prior to that date. The deadline for filing claims in the AmCap receivership proceeding is 11:59:59 p.m. on October 14, 2021.
- Effective Immediately (03/22/2021), New Business restrictions are in place for American Platinum Property and Casualty Commercial Residential Program. No new business will be written until further notice.
- AM Best Tower Hill Prime Insurance Company from “A-” to “B++” in December.
In response to these notable changes and sudden shift in demand for replacement or supplemental Florida condominium capacity, many of the carriers that remain active and viable in the Florida condominium space have upwardly adjusted their pricing, deductible requirements and/or underwriting guidelines, while sometimes simultaneously limiting the line size they are comfortable dedicating to any single placement.
While each upcoming Florida condo renewal result will stand on its own based on the individual characteristics of the account, rate increases in the 15% to 25%+ range are now commonplace in situations where the expiring program structure remains consistent. Older condo construction accounts, those that are being non-renewed, and those placed ground-up last year with no available ground-up solution this year are examples of accounts which may see rate increases well in excess of 25%, with 50% to 75%+ rate increases sometimes in play in such situations for a variety of reasons.
2021 is proving to be a more challenging market than 2020. Many clients are continuing to experience difficult renewals where they are encountering rate increases, deductible changes, and/or reduced coverage from carriers. As we continue into 2021, you can expect Property rates to continue to climb; social inflation to drive Liability pricing; and the hard market for D&O and Excess Casualty to continue as carrier concerns remain.
Below we break down what you can anticipate for the remainder of 2021, including current renewals.
PROPERTY
Property premiums are on the rise and carriers are utilizing more discipline when underwriting new and renewal business. From increasing rates, higher deductibles to fewer enhancements and stricter underwriting, even the best in class properties are feeling some pressure.
Carriers rely on computer modeling to manage their risk and to ensure rates are adequate. They are paying much closer attention to their models, not only across their books, but across each individually written policy. This means that clients with strong risk profiles and good loss history may be impacted.
- Double digit rate increases can be expected. Non-CAT property with good loss history may see, on average 5% to 20% rate increases. CAT exposed property with good loss history can expect 15% to 30%+ rate increases. Accounts with poor loss history may see 30% to 60%+ rate increases.
- Carriers may be looking to increase Wind Deductibles and limit or reduce coverage enhancements.
Larger Value CAT exposed schedules are going to Excess & Surplus Layered policy structures, where multiple carriers participate in a vertical and/or horizonal Layering Program. These E&S carriers are also adding Post Loss Assignment exclusions or limitations, which are designed to combat against Assignment of Benefits abuse (AOB).
ANCILLARY (General Liability, Crime, D&O, Umbrella, Excess Liability)
Cyber and privacy issues continue to result in significant litigation, both from a regulatory and class action standpoint. Social inflation has created the most impact and disruption on umbrella and excess liability placements. Concerned with a litigious environment that is favorable to plaintiffs and increasing jury verdicts, carriers are pushing rate increases and tighter underwriting guidelines.
We expect primary and umbrella/excess casualty underwriters to maintain this stance throughout 2021. We are seeing reduced capacity in primary and excess markets. Slip and fall claims combined with high medical costs have served to harden this market, particularly for habitational risks.
- You can expect to liability rate increases between 2.5% and 15%.
- Umbrella/Excess Liability rates continue to firm between 10% to 25%.
FLOOD
Flood insurance has been steadily increasing over the past several years and 2021 is no exception. Flood insurance continues to see rate increases which varies by zone (VE, AE, X, etc.), with the percentage depending on the numerous variable risk characteristics of each property. New flood maps are currently being reviewed and associations will need to pay attention as to how any new map changes might affect their premiums. While the overall map changes maybe anywhere from one to two years away from being adopted, it pays to be aware if these proposed maps will benefit your association or if they might negatively impact rates? If so, there are steps that can be taken to “Grandfather” into current maps, if they are more favorable than the proposed ones. We advise discussing this with your agent as each risk is unique.
OTHER INDUSTRY ISSUES & CONSIDERATIONS
Increased submission volume is allowing underwriters to be more selective. They are focusing on profitability and can be selective in what they underwrite.
Solutions in this Challenging Market
Even amidst challenging market conditions, opportunities still exist. Gulfshore Insurance’s association specialists have been successfully insuring and protecting community and condo associations throughout Florida for more nearly 50 years. Our full arsenal of insurance carriers are well-equipped to manage the changing tide of Florida condominium coverage, and we are 100% committed to identifying the very best available combination of pricing, terms, and conditions for your condominium accounts.
If you have any questions, please do not hesitate reach out to your Gulfshore Insurance Client Advisor who can offer assistance. We are here to help.
Gregory Havemeier, CIC, AAI, CIRMS is a Client Advisor and Partner at Gulfshore Insurance specializing in community and condominium associations. Gregory works with a wide range of business clients to deliver strategic risk analysis and guidance. Comments and questions are welcome at ghavemeier@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in business insurance including liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, and more. Our insurance and risk management advisors are industry specialists for condominium associations, golf and country clubs, oil and petroleum marketers, construction, landscaping, churches and non-profits, and work comp. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
Recently, the Federal Aviation Administration (FAA) released its long-awaited rules on drone operations over people and moving vehicles and night operations. These rules represent almost two years of work in which the FAA considered tens of thousands of comments. Questions regarding safety, property damage, and privacy are forcing community associations to establish clear parameters for their use by unit owners.
As for flying legally, drones need to 1) be registered with the FAA, to the extent required, 2) be operated by an individual duly licensed by the FAA, to the extent required and 3) be flown and utilized only in accordance with the FAA and other applicable governmental requirements. In addition, the FAA now requires that drones must be properly registered and labeled with the registration number. They must only be flown below 400 feet and always within sight of the operator.
As for not disturbing the residents, drones need to 1) be flown within the community in a manner not to interfere with an owner’s reasonable expectation of privacy, 2) not utilized in any fashion to spy or otherwise peer or take pictures into the residence of another owner’s property, 3) not utilized to harass any person with respect to private property or to the Association’s common property and 4) not utilized in a manner to cause injury to person or property.
Currently, commercial use of drones (for example related to real estate agents, roofers, and disaster restoration companies, among others) requires FAA approval. It is critical to make sure that your vendors are in compliance with federal laws and guidelines.
Adoption of Rules and Regulations for drones in your community could go a long way in addressing concerns and questions. Things to consider are:
- Establishment of designated take-off/landing sites
- Restriction of hours of use, i.e. only daylight hours, etc.
- Penalties for violations of those rules and regulations
- Clarifying that the Association is not liable for any property damage caused by the drones
- Ensuring that if the user of the drone causes property damage, they are held liable.
Federal Aviation Administration (FAA) Rules for Unmanned Aircraft Systems (UAS)/Drones
Keep in mind, the use of drones comes with additional risk. Before implementing any drone usage, the association should consult with its insurance advisor to ensure the association is covered for hazards that can result from the use of drones. Like everything else flying around the sky, drones can crash. Imagine a drone crashing into someone’s house, or a car, or even into a person walking his or her dog. Lawsuits will inevitably follow. The association needs adequate insurance protection against potential liability. Typically, drones are not covered by the General Liability insurance policy, and there is a standard aviation exclusion in most policies. Some policies go as far to have specific “unmanned aircraft” exclusions. There are, however, markets available for Drone Liability policies. You should consult with your insurance advisor to confirm that the association is adequately insured with regard to the risks that may arise as a result of the use of drones.
Joe Thompson is a Client Advisor and Partner at Gulfshore Insurance who specializes in managing risk for community associations and various contractors. Comments and questions are welcome at jthompson@gulfshoreinsurance.com
Gulfshore Insurance is a Naples, Florida based insurance agency specializing in business insurance including liability insurance, property insurance, workers compensation insurance, vehicle insurance, business income interruption insurance, cyber insurance, commercial umbrella insurance, and more. Our insurance and risk management advisors are industry specialists for condominium associations, golf and country clubs, oil and petroleum marketers, construction, landscaping, churches and non-profits, and work comp. Navigating insurance requires an experienced and trusted insurance agent who understands your business risks and exposures. Gulfshore Insurance services Naples, North Naples, Marco Island, Bonita Springs, Fort Myers, Sarasota, Lido Beach, Longboat Key, Bradenton Beach, and Southwest Florida. We have office locations in Naples, Fort Myers, Fort Lauderdale, and Sarasota.
