Calculated Risk: The Price of Property
The insurance market is hardening. What does "hardening" or a "hard market" mean exactly in insurance? To put it simply, it means rates are increasing, underwriting standards are more strict and coverage options are harder to find. It was the hard market in the mid '80s that resulted in forming the AMLJIA.
soft market, carriers relax their underwriting standards. Coverage is widely available and underwriters will often negotiate coverage and be flexible as well.
In other words, times are good. Market hardening and softening run in cycles and affect the price that the AMLJIA has to pay for its excess and reinsurance. Right now, property prices are hardening globally.
Many changes affect today's market. Natural disasters play an important role in property pricing. In 2017 alone, economic losses of $330,000,000,000 resulted in insured losses of a shocking $144 billion. Even though these happened years ago, they are still being paid out and impacting renewal rates. Some other factors include:
- Insurers expecting more claims and higher claims costs due to past experience
- Price increases of goods sold, the state of the current economy and technology
Past losses and present changes greatly impact excess and re-insurance rates, claim values, and offered coverage.
This market hardening is expected to continue into FY21 or possibly longer. While the pool was designed to help even out the ups and downs of the market cycles, the AMLJIA is not immune from the fluctuations. Expect property rates to increase next year. Ultimately though, the hard market means continued commitment from AMLJIA to provide the best services, coverage availability, and affordability for our members.