Cat exposed US property rates continued to soar in Q4: MarketScout

Property insurance prices in peak catastrophe zones continued to soar in the fourth-quarter of 2021, as owners of homes and businesses in those regions of the United States were paying rate increases as high as 40 percent, according to MarketScout.

Once again, MarketScout’s latest data on property insurance pricing shows that the steepest rate increases continue to be seen for risks in peak catastrophe zones, such as Florida wind and California wildfire.

Coverage issues are also considered a growing issue for high-value buildings in peak catastrophe zones and we understand from other sources that Gulf Coast areas are facing escalating rates as well, especially for properties deemed more at risk to surges or to wind damage.

MarketScout found that overall commercial property and casualty insurance rates rose by 5.8% in Q4 2021, down slightly from the 6.8% increase seen in Q3.

Commercial property was one of the areas with the steepest increases in the fourth-quarter, although again a little slowed down since Q3 but that could just be a factor of the year-end approaching.

MarketScout said that commercial property rates rose by 8.3% in Q4 2021 on average and once again large or jumbo sized insurance accounts were rising fastest in the quarter.

Richard Kerr, CEO of MarketScout noted, “The fourth quarter 2021 reflects moderation in rate increases. However, when comparing rates for the entirety of 2021, rates did increase from plus 5.6 percent in 2020 to plus 6.6 percent in 2021.”

In personal lines property insurance, rates also moderated slightly from the third-quarter, averaging 4.25% up in Q4.

Larger properties of $1 million plus rose faster though, at a 6.3% rate increase for insurance in the fourth-quarter of 2021, while lower value homes only saw 3.7% rate rises.

MarketScout CEO Kerr commented, “The composite national personal lines market continues to steadily adjust rates as necessary without year-over-year massive rate increases.

“However, for CAT exposed properties, rate increases can be dramatic; as much as twenty-five to forty percent in areas such as the wildfire corridors of California or Southern portions of Florida.”

Soaring insurance rates for catastrophe exposed properties are still rising much faster than reinsurance, but as these continue to increase it does suggest that firming of reinsurance may persist too, especially for the peak catastrophe zones.

These soaring property insurance rates also explain why some carriers feel now is the time to expand in states like Florida, with a number of primary insurers stating their intention to grow in the sunshine state recently.

That too bodes well for reinsurance capital providers, as these carriers are likely to utilise reinsurance as a lever to help them manage their growing books and exposure.

In the property catastrophe specific area of reinsurance, especially where coverage is sought for a specific peak peril zone, or state (such as Florida), these pricing trends in primary insurance suggest reinsurance needs to keep rising too.

MarketScout forecast this a few quarters ago.