Catastrophe exposed property rates continuing to rise fast: MarketScout

Insurance rates for residential and commercial properties in the United States that are exposed to catastrophe risks continued to rise fast in the fourth-quarter of 2022, while the hardening of reinsurance at the January renewals will now also have a trickle-down effect, MarketScout has said.

Property insurance prices in peak catastrophe zones have been soaring all the way through 2022 and it looks like this is set to continue into the new year.

MarketScout’s new data, on property insurance pricing through Q4 2022, shows the steepest rate increases are once again being seen for risks in peak catastrophe zones, such as Florida wind and California wildfire.

In recent quarters, coverage issues have begun to emerge with the elevated prices, as affordability is becoming a factor.

There’s a good chance this helps to raise the profile of coverage alternatives, or replacements, including parametric products and especially for higher-value homes or commercial businesses, as carving out parametric sections of cover will become increasingly competitive, we at Artemis believe.

MarketScout explained that, during Q4, “The composite rate for all property insurance continues to be challenging with a rate increase of 9.3% in the fourth quarter.

“Certain cat-exposed commercial properties are being assessed increases as high as 25% to 30%.”

“On January 1, 2023, property cat reinsurance renewals were completed except in instances of poor underwriting and continuous losses,” explained Richard Kerr, Founder of MarketScout and CEO of newly formed Novatae Risk Group. “Virtually everyone was assessed more restrictive terms and conditions. The trickle down will have a notable effect on the profits of property MGAs and program managers due to lower base commissions.”

On the personal residential side of the US property insurance market, MarketScout said that cat-exposed homeowners accounts continue to experience large rate increases in Q4.

Across the composite tracked by MarketScout, homes under $1,000,000 in coverage A value saw their rates up 7%, while homes over $1,000,000 were up 7.3%.

However, Kerr explained, “We constantly remind our subscribers that the composite rate for homeowners includes homes in all geographic regions.

“Catastrophe-prone areas, such as wildfire zones in California and wind-exposed Florida locations, are being assessed higher rate increases, sometimes as much as 30% to 40%.

“Reforms recently enacted by the Florida legislature may help moderate rate increases for all homes in Florida, but any home which is wind exposed will still experience rate increases.”

There is clearly a tailwind behind catastrophe exposed property pricing and now with reinsurance rates far higher for US property programs, there could be a continued impetus to these increases through 2023 as well.