Property North America
Rising capacity supply
We are continuing to see a robust appetite for North American Property business in the London and European marketplace. Strong underwriting results in 2023 led to existing players deploying more capital in this space. Alongside a handful of new entrants this has increased the capacity supply.
Excess and Surplus (E&S) business is still flowing into the market at an elevated level and written premium continues to rise. The availability of alternative capacity and growth plans from major London carriers have created opportunities for cost reductions on client programmes. Some enhancements in terms & conditions are available.
Changes in policy terms and conditions
Oversubscription on placements is allowing us to exert a bit more pressure on carriers to remove non-concurrencies on terms & conditions. Valuations are less under the microscope as carriers have become more comfortable with client methodologies when declaring total insurable values (TIVs) and inflation has flatlined.
Underwriting changes
Westfield has entered the market through their acquisition of Argo Syndicate and the subsequent recruitment of market veteran Richard Wood. Everest has started to write US Property business from London effective May 2024. The syndicate is deploying additional capacity to that offered in the US and at launch was collaborating with four brokers (of which Lockton is one). Munich Re Syndicate has hired Charlotte Macey to set up a North American Property team and started writing business in July 2024.
Notable claims
Secondary perils (non-modelled) are a concern on some accounts. These include tornado, hail, convective storm, freeze and wildfire. These perils have generated over USD 150bn in losses in the last three years alone and are now the largest contributor to underwriters’ loss numbers. There is a lot of uncertainty around the modelling and pricing of these perils and terms and conditions (T&C's) reflect this.
Geographic/sector differences
Underwriters remain concerned about challenged occupancies, including food processing, frame habitational and recycling.
New solutions
In conjunction with Hamilton, Lockton has launched an exclusive & innovative solution seamlessly complementing California FAIR Plan policies for homeowners. The DIC (Difference in Conditions) wrap-around offers comprehensive insurance providing coverage more similar to a traditional homeowner policy with a limit of up to USD 2m.
Strong underwriting results in 2023 led to existing players deploying more capital in this space.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Premium rates may fluctuate depending on the Atlantic hurricane activity in 2024, but increased capacity in both the London and US domestic marketplaces have resulted in greater competition and rating competitiveness. Oversubscription on some placements is creating leverage on pricing and some underwriters are beginning to focus on rating adequacy over rate movement. A combination of new capacity and the ability to restructure programmes and remove expensive capacity is resulting in programme cost reductions on clean desirable accounts. Heightened Secondary Peril loss activity and uncertainty over modelled loss pricing is still presenting challenges for underwriters
Expected capacity change in the next 6 months for claims-free portfolios
Existing players have deployed more capacity in the space, and we are seeing new entrants emerge in the London Market.
Expected coverage change in the next 6 months for claims-free portfolios
Oversubscription is allowing for increased leverage on terms and the removal of non-concurrencies.
The DIC (Difference in Conditions) wrap-around offers comprehensive insurance providing coverage more similar to a traditional homeowner policy with a limit of up to USD 2m.
Emerging risks
US elections in the latter part of 2024 are focussing underwriters’ minds on potential strike, riot and civil commotion (SRCC) incidents, particularly on primary retail business. Some Treaty renewals introduced restrictions specifically around this coverage and a few markets are looking to exclude these perils as a result. There is a strong Political Violence market in London where the coverage can be bought on a standalone basis if required by the client. We are working collaboratively with our Crisis Management team to make this a seamless process.
Renewal recommendations
We would recommend that clients continue to focus on providing quality information as early as possible in the renewal process. This will allow placement teams to find creative solutions and to leverage the increased market appetite. We continue to advocate for clients to meet underwriters face to face to differentiate themselves and build a rapport.
For further information, please visit the Lockton Specialty page, or contact:
Tom Rowley
Head of North American Property
E. tom.rowley@lockton.com