After years of losses in the multifamily habitational market, insurers have become far more cautious for both property and casualty coverages, cutting back capacity or even leaving the market altogether. Rates and deductibles have been rising as carriers more closely scrutinize the risks they are willing to entertain while adding a variety of exclusions. Below is a list of 10 things to know about the habitational market, according to CRC’s Wholesale & Specialty market report.
1. Markets have become extremely sensitive to valuation for frame habitational risks after large losses in 2017 and 2018 showed that reported values were often inadequate. As higher valuations are entered in catastrophe models, this tends to raise the potential modeled losses, in turn, making carriers more reluctant to extend larger limits on excess layers because they may find themselves closer to the potential loss. Larger, layered programs are more challenging to assemble.
2. Insurance to value is also coming into play, as underwriters look to more carefully ascertain current property values. The values need to be appropriate because restrictive covenants related to valuation and recovery, which had been ignored in the more competitive market, are now very much active. — David Pagoumian, CRC Property Practice & Red Bank, N.J., office president
3. Habitational specific markets are seeking rate increases in the 10% to 15% range. On larger deals, carriers are seeking higher deductibles for all-risk or water damage. Markets are more often requiring split deductibles, such as for water damage, theft and vandalism. For some non-coastal frame apartment schedules, carriers are looking for deductibles ranging from $100,000 to $250,000 and may pair those with percentage deductibles for wind and hail in high risk hail areas. — Edward Magliaro, executive vice president, CRC Property Practice Leader
4. The habitational casualty market is beset by rate increases and capacity limitations after a decade of losses, which have worsened in the last several years. Many carriers have experienced significant losses that have driven a retraction of capacity. A number of markets have stopped offering general liability and excess coverage.
5. There is less capacity for lead excess in the E&S arena. Most companies don’t want to put more than $5 million, and the pricing is extremely high. — Mike McCall, CRC, Los Angeles Casualty Team
6. Another issue facing apartment and building owners is habitability claims. While these claims seem to be affecting California owners currently, carriers are concerned they could spread across the country. Habitability claims involve the status and living conditions of a property. These claims are related to current living conditions and do not require a specific instance of bodily injury or property damage.
7. For excess liability insurance, average risks are experiencing rate increases of 30% to 50%. Those with significant losses and more than an insignificant number of subsidized units may be seeing increases of 100%.
8. Insurers are scaling back limits significantly for lead umbrella or excess coverage. Many carriers have reduced their lead capacity from $25 million to $10 million and in some instances to as little as $5 million. As a result, brokers must broadly expand their marketing efforts to renew the expiring umbrella or excess program limits.
9. Crime statistics are playing a bigger role in casualty placements, as underwriters increasingly run crime scores for neighborhoods and specific locations based on actual crimes reported. With better empirical data readily available, casualty underwriters are placing more emphasis on crime scores from a variety of vendors for all submissions where they are available. Some underwriters are not quoting above a certain crime score.
10. Our advice to agents and brokers: Market accounts and market accounts early. Bad news doesn’t get better with time. — Jeff Coles, CRC, team leader, Los Angeles Casualty Team
Topics Carriers Excess Surplus Property Casualty
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