This is the state of the market for property in the central and southeastern United States, including trends about rates, capacity, limits, and COVID-19.
2020 has been a very different year for property insurance. The industry has weather COVID-19, the elections, a record number of named storms, wildfires, and more. As we approach the end of 2020, it's a great time to discuss the state of the market for property. In the coming weeks, we will release more information about the state of the market for all of CRC Group's major lines of business.
Paul Martin | CRC Group Property Broker in Birmingham, AL and Member of the Property Practice Advisory Council
Stacey Newman | CRC Group Senior Vice President/Property Broker in Chicago, IL, and Member of the Property Practice Advisory Council
Dan Wentz: [00:00:00] 2020 has been a very different year for the insurance industry. COVID the elections, a record number of names, storms, wildfires, you name it it's happened this year. As we approach the end of 2020. It's a great time to discuss the state of the market for property. In the coming weeks, we'll have a lot of relevant information for you and regional considerations for all of our lines of business.
[00:00:23] But today we're going to dive into the state of the market for property in central and Southeastern United States rates capacity limits. COVID got it all next right here. Yes. Is the placing you first podcast? I'm Dan Wentz and this podcast features news and insights from CRCs vast knowledge base of 2000 plus associates who write an excess of $10 billion of freemium annually.
[00:00:50] And we're giving you insider access to what's happening in our company and the types of insurance we play.
[00:00:56] Paul Martin: [00:00:56] This is the placing you first
[00:00:58] Dan Wentz: [00:00:58] podcast. So we're joined now by. Paul Martin, who is the national property practice leader and located in CRCs, Birmingham, Alabama office right down the street from me, believe it or not.
[00:01:11] And Stacy Newman is with us today. She's a property broker from CRC, Chicago, active member of that property practice group. And these are two great specialists that have joined us today to offer their input on what's going on with the property state of the market, as it pertains to the middle of the country.
[00:01:28] Uh, so let's start there. So, so how are things going in property, Paul? What do you think?
[00:01:36] Paul Martin: [00:01:36] Uh, been an interesting year, Dan. I mean, we w we've certainly seen, uh, as the year has progressed, we, uh, we saw the market was certainly turning from last year in, into the 20 year, but as years progressed, we've seen that accelerate, uh, you know, a lot of classes of business, especially to begin with, you're talking about, uh, Uh, the, the cat exposed business and we say cat exposed business Southeast in the middle of the country.
[00:02:02] We were talking about hurricane, uh, and it certainly, this year has been an indication of why we we've seen those, those rates change and deductibles go up is because the amount, the number of hurricanes that we've seen to share, this is, uh, just been an unbelievable average every time we think we've seen the last hurricane, we have another hurricane coming, but that is certainly impacted what we've seen.
[00:02:23] Uh, Oh, I think we're going to continue to see accounts that have not been affected by the change in the marketplace. Yet. You're going to see deductibles in Greece. You're going to see rates continue to increase own those hurricane exposed properties.
[00:02:36] Dan Wentz: [00:02:36] Yeah. And Stacy, what about your perspective up there in Chicago?
[00:02:39] Uh, what, what are you all seeing
[00:02:42] Stacey Newman: [00:02:42] right now? What we're seeing is, is probably the toughest market that I've seen in the last 30 years. Uh, I was an underwriter for about 10 years and been brokering for 20. Um, and the market for Midwest, uh, property Midwest based properties has, uh, has tightened, uh, from a rating standpoint, Cassidy standpoint.
[00:03:07] And in deductible standpoint, it's been the hardest I've seen, um, In my, in my career. And it's, it's been a progression, I would say for the last five years,
[00:03:21] Paul Martin: [00:03:21] Stacy you're you're right. You know, I think what you're saying to me, being in Chicago, you're seeing a lot more of the, uh, what we all now call convected storm exposures this year.
[00:03:30] You know, we're talking about tornadoes and talking about hailstorms. That has been a, that class of business. When I talk about. How hurricanes have affected coastal business, you know, from Texas to the, to the East coast, we are, we have seen convected storm exposures, accelerate. I mean, those, those exposures have been unbelievable this year.
[00:03:49] How, how carriers are now instituting, uh, A percentage, wind deductibles. A lot of times, percentage when deductibles that are even higher than what we see on hurricane exposed properties, we're seeing rates rates are just going up tremendously and saying that carriers are cutting their Quebec capacity way back.
[00:04:08] Historically we would think carriers that were willing to put up full limits that are now coming back and they're offering either. Small quota share limits or small primaries, and there are more and more. We're seeing carriers unwilling to put up these large limits.
[00:04:23] Stacey Newman: [00:04:23] I completely agree. And, and it started, I would have to say about five, six years ago.
[00:04:30] Um, when the standard market started pulling out a certain States like Oklahoma and Kansas, they stopped writing. Uh, the, I would call it building risks. So there's no business, personal property. There's no business income, more or less serves risks, warehousing, strip malls, et cetera. And. They have stopped.
[00:04:55] They stopped writing, uh, due to the hail and, uh, tornado exposure. And those started coming into the ENS market. And, uh, we had, we had a wind deductibles percentage deductibles that we had to educate our retailers on what a percentage deductible was because they weren't used to. Uh, dealing with the percentage deductible, it was more of a hurricane based or, or quite based, um, structure.
[00:05:24] Um, now it's interesting, you know, fast forward five years, standard carriers are putting on percentage deductibles. They're excluding wind completely. I'm seeing deductibles up to 5% in certain counties of Oklahoma and Kansas and Colorado. So. It's a complete change in, in how the markets are handling that business.
[00:05:52] And it's creating opportunities for us and creating opportunities for wind deductible buy downs. Um, as wholesalers, we can be a little bit more creative with our structures and having place accounts. And so, um, that that's been a, a good opportunity for us to chat with our retailers and help their insurance.
[00:06:15] Paul Martin: [00:06:15] It's probably the biggest class of business that we've seen across the country. When you talked about, you know, you talk about ENS brokers, you know, surplus lines, brokers, like CRC is historically, we have looked at States, you mentioned earthquake and hurricanes. And that used to be a really big part or a big percentage of a lot of brokers, uh, property brokers look to business.
[00:06:36] But as you said over the last three, four, five years, we've certainly seen that progress out. It's expanded out. But probably originally I saw a lot more of the, uh, what we'd would say habitational apartment accounts, you know, historically apartments were just a tough class a bit, just because, you know, we talk about attritional offices, but normally we were worried more about the fire loss than any other peril, probably on apartments.
[00:07:01] And now that has progressed to the convected stormy issue is become as big or bigger issue now on apartments as the virus has. And I think because of that, we now we've expanded into the other classes of business, you know, whether it's it's, uh, uh, large manufacturing accounts, warehousing accounts, uh, even, uh, shopping centers, hotels, uh, And then we've really gotten into the, uh, municipal, uh, book of business, you know, States, counties, schools, you know, we've seen it progress across the board down.
[00:07:35] And we, we see lots of, of these when discal accounts down in, in the ENS market and it's primarily caused. So let's say you said Stacy is that a lot of these standard lines carriers have withdrawn from those classes of business. And so now our carriers who came in to begin with, and now they're all cutting their lines back there.
[00:07:54] You know, they're, you're putting higher deductibles on it. They're increasing, uh, uh, their, their rates. So it's, uh, it's gonna be an interesting time over these next few months to see what happens.
[00:08:04] Stacey Newman: [00:08:04] Yeah, I think, I definitely think it's going to continue, um, well into, uh, 2021 and probably 2022. Um, The standard market rates were so depressed in the Midwest.
[00:08:19] They all, when they retreated from the hurt, you know, there was a hurricane, they would retreat from Florida. They would treat retreat from Louisiana. I remember, um, being NAPSLO during Katrina and everyone was talking about capacity and, uh, price seeking in Louisiana and the hurricane driven States. And.
[00:08:40] In my view, I was like, Oh gosh, that means that the rates are going to go down and capacity is going to go up in the Midwest. And that's exactly what happened. The standard markets are paying for that. Now they depress the rates so much. They cannot, they, they, they could not handle the losses that they were taking in.
[00:09:01] Paul Martin: [00:09:01] Right.
[00:09:03] Stacey Newman: [00:09:03] One other thing to kind of mention about hail and what we're seeing a lot is is the terms and conditions changing quite a bit. Um, most carriers now are putting on, um, ACV and on the roofs. Um, if they're over a certain period of, uh, or a year build. So like anything over 10 years or anything over 15 years, um, the carriers, uh, are we're tired of re.
[00:09:30] Replacing and maintaining insurance roofs. Um, and so it's just a standard endorsement now. Uh, and we're also seeing a lot of cosmetic damage exclusions on our policy. And that's just one thing that, um, retailers need to be aware of.
[00:09:49] Paul Martin: [00:09:49] Hey, you know, you're talking about the roofs. Uh, what we're seeing on a lot of the, uh, coastal business is, you know, ironically on the coastal business, We talk about coastal apartments, coastal condos, that class of business, we're eight.
[00:10:02] We have more markets that are willing to put up bigger lines or bigger limits on that class of business. Then we own our own
[00:10:08] Stacey Newman: [00:10:08] the non-coding. I agree. I agree with.
[00:10:11] Paul Martin: [00:10:11] Yeah, absolutely. And what we're seeing is, uh, We're seeing, you know, South Carolina, Florida to Texas, we actually have admitted carriers who were white apartments and condos in those States.
[00:10:25] Whereas we don't have admitted carriers that want to write a lot of the non coastal non hurricane exposed us States. So, but now saying that the other thing we are starting to see. Is, we're starting to see a lot of those carriers get a lot more selective with what they're, what they're writing. You talk about roofs in the, uh, you're you're talking about non hurricane, uh, exposures on the roofs and, and, and, and whatnot is that we are seeing a lot of these carriers.
[00:10:50] Now they're, they're kind of drawing the line that if to write a piece of new business, the roof can only be. 10 to 15 years old or otherwise they don't want to look at it. So all these carriers that have historically looked at those things have been really, really aggressive. Their underwriting guidelines are getting much stricter now than what they were in the past.
[00:11:09] Stacey Newman: [00:11:09] Yeah. Information is the key.
[00:11:12] Stacey Newman: [00:11:12] we're getting in the submissions roofing page size of the roof. Uh, it's extremely important to have that information when we're sending our information over to the underwriters to analyze,
[00:11:25] Paul Martin: [00:11:25] Hey, Dan, you got to ask us some questions there. Okay.
[00:11:28] Dan Wentz: [00:11:28] Yeah, yeah, yeah, no, you're doing great.
[00:11:29] You're doing great. Uh, what about COVID how's COVID playing into, uh, the property worlds
[00:11:37] Paul Martin: [00:11:37] COVID-19 um, you know, so far I haven't had any accounts that have. Paid a loss on COVID-19. We've had a lot of, uh, losses turned in. Uh, if I got a call from an agent or from an insured asking, what should they do? I said, turn it in, let the carrier, make the decision on it.
[00:11:59] But most carriers have turned them down. I mean, they didn't just turn them down right away. They looked at it. I wanted to make sure that they knew what the, uh, you know, what the reason for turning the claim was. And they wanted to make sure review their policy and get the, get the wording out to the insured.
[00:12:13] But, but most of the time it's like, all right, it didn't meet the trigger that there was no directors with damage. And you had virus and bacteria and, you know, uh, uh, you know, communicable disease exclusions were on most of the policies. So even though we've had a lot of claims turned in, I personally have not seen any of the accounts that are right.
[00:12:35] Pay a claim for it. Certainly it's something that all the carriers are aware of. I think a lot of carriers have probably put in a certain amount on their, their loss reserves to take that into account. But I have not seen a personally sent a claim, a claim paid. I've heard about them, you know, uh, manuscript forms where they didn't have the exclusions or they didn't have the directors go grant damage trigger necessarily like a standard property policy does.
[00:13:01] But I have not seen one of those myself. How about you, Stacy? Have you seen one?
[00:13:05] Stacey Newman: [00:13:05] I have, I have not seen, uh, any of the claims that have been turned in paid. Most of them have been denied in a very slow process. Um, couple of things that I have been seeing with COVID is, is in some situations I'm seeing some manufacturing accounts where their sales have gone down and I've seen others that they've gone up depending in the, in, in what they're manufacturing.
[00:13:32] Um, and so that's been very interesting and a lot of. Uh, underwriters are asking the question, what, what is the impact on COVID been on, on this risk? And they want to know the answers they, as they underrate the account. The other thing that I've been seeing is an influx of vacant properties, whether they are strip malls and, or, um, a fair amount of hotel motels.
[00:14:01] Where, where they're coming in. And, um, they're looking just for six or six month policies. Um, they're closing down the property just for six months, um, until hopefully. You know, we can get a vaccine and they can reopen. So th that's been creating some opportunities, especially on the vape, on the vacant properties.
[00:14:24] Dan Wentz: [00:14:24] Those are the most positive group I've heard. Talk about COVID and talk about the market right now. This is good.
[00:14:30] Stacey Newman: [00:14:30] This is refreshing. I will say that it was very interesting. There were a lot of knee jerk reactions on certain classes of business. Like I had a couple underwriters, like. Say, I don't want to ride hotels anymore because of COVID.
[00:14:44] And it's like, well, actually it's probably better that there's not a lot of people at the hotel. You have less exposure on whatever. So they didn't want to write BI anymore. Like there were a couple knee jerks, but other than that, it really has been,
[00:15:02] Paul Martin: [00:15:02] the other thing we have seen is we have seen some updates on forums.
[00:15:06] Um, you know, when I say we haven't seen a claim paid, I did have some affiliated FM policies affiliated has they have come back that they had a supplement on their policies for communicable disease. And so I have a number of municipal accounts that are right with those guys and they own the renewals they reduced rather than just totally excluding it.
[00:15:30] They reduced their sub limit from a hundred thousand dollars. Per cartridge and annual ag to a thousand dollars per occurrence in annual aggregate limit. So that, that they w I didn't see a claim paid, but they have reduced their, their limit. They haven't just totally excluded it. Whereas other carriers are coming in and they're, they're modifying their exclusions.
[00:15:52] They're adding additional wording. They're specifically addressing communicable disease, you know, whatever it might be there. But, uh, like I said, most of them though, They were, they were pretty something they have, they have virus, exclusions have been something we've had on most of these policies for a good while now.
[00:16:07] Stacey Newman: [00:16:07] Yeah.
[00:16:07] Dan Wentz: [00:16:07] Okay. Well then we can go down the list. I think we talked a little bit about cat property already. We talked about convective storm a little bit. What about flood? I don't think I heard flood mentions anything going on in the flood area.
[00:16:20] Stacey Newman: [00:16:20] I would say in the Midwest flood has probably been the hardest thing to place.
[00:16:26] Uh, if you're, especially if you're looking at it, mono-line. Um, retailers expect the pricing to be extremely cheap, just like NFP. Um,
[00:16:37] Paul Martin: [00:16:37] it's
[00:16:37] Stacey Newman: [00:16:37] I think it's difficult to place. We asked for a lot of information. We want flood elevation certificates. We want to know exactly what type of product that they have in that could be damaged.
[00:16:49] Um, and it's expensive and the capacity is, is not there. That's what I'm finding. If you're looking for mono-line. Flood coverage. Um, typically on a large account, you can get flood covered into a master program, but if you're placing it, mono-line, it's very difficult.
[00:17:09] Paul Martin: [00:17:09] Oh, I would, I would agree with that. We, we have, uh, over the last few years, I mean, zone eight flood has been very difficult and anything in a high hazard flood zone.
[00:17:19] And you know, we we've seen a lot of carriers cause we're lions back. Uh, a lot of them, they certainly look at minimum price per meals week. We can see anywhere from 5,000 to 25,000 minimum per meal pricing from what the carriers. And they may be willing to put up anywhere from two and a half, maybe to 10 million of capacity each.
[00:17:37] Now that that's been, become much more restrictive over these last few years. Uh, if you get to, and of course now they all either require. Most of them, I should not all, but most require to be excess of, of inner poppy or at least excess of a deductible that would be equivalent to what antibiotic is. Uh, if they want to see elevation certificates, if it's a negative elevation.
[00:17:58] It's going to be very tough to get it placed if it's got negative elevation on it. And you're right. If it's going to be normally, we're going to, we're going to see it modeled line. That means it's, it's probably an issue to begin with. If it's not on the master program, right.
[00:18:12] Dan Wentz: [00:18:12] A builder's risk. I don't think we mentioned anything about builder's risk
[00:18:17] Paul Martin: [00:18:17] brain builders risk.
[00:18:18] When I hear the issue in builder's risk, uh, right. We we've seen a lot of builders risk. I mean, I've seen everything from, uh, high rise, coastal condos and hotels down in Florida to, uh, uh, high rise, uh, office buildings in California. Uh, you get in California, if you don't. You know, normally when I've placed those, it's been without the earthquake, we get a standalone earthquake policy to go and continuing to be placed in conjunction with that.
[00:18:45] But you get some of the carriers that can put a big limits. I mean, we have carriers that can put up two, three, $400 million in limits you get in these areas that don't necessarily have a cat, uh, component to it. Uh, if I get into the coastal, uh, uh, hurricane exposed properties, We we've got a number of carriers out there.
[00:19:06] We, I mean, we, they still want to look at those. It still just comes down to like every other, uh, piece of cat expose business. We have, they they've got minimum deductibles. They've got minimum rates. Uh, but we there's lots of capacity out there for builders risk where the real constriction of capacity has come for builder's risk over the past couple of years or past three or four years has been on frame builders risk.
[00:19:30] And in particular, if you talk about large individual buildings, you know, we call it podium construction, or, you know, however they would people, but it's one large. Frame structure, you know, we could be anywhere from 20, $56 billion in a single frame structure, those have become a real issue. Uh, there's been lots of fires on those and lots of losses.
[00:19:53] So you've had carriers come in and they've got larger deductibles. They've got additional security requirements now, and then their, their limits have just been cut back tremendously. Whereas in a lot of other, a lot of carriers, it used to right brain. Builder's was just totally pulled out and went right.
[00:20:09] It at all.
[00:20:09] Stacey Newman: [00:20:09] Yeah. I'm in complete agreement. Um, on the frame construction, especially the podium style, extremely difficult to place multiple carriers. Um, key information on builders trust is really to get that timeline, uh, and, uh, get a really good idea of the spread of risk. If it's multiple buildings, um, But the prices have gone up.
[00:20:36] Um, and there's limited markets. When you mentioned the security in the past, you could get by with fenced or, or lights, or now everyone wants, you know, outside security and cameras. And there's just a lot of times, there's no way to get around that new hunger. So yeah.
[00:20:57] Paul Martin: [00:20:57] Yeah, of course I'm staying away from some of those being honest with me.
[00:20:59] I just see that as being an Eno waiting to happen. You said, you said they had this claim paid no for you.
[00:21:10] Dan Wentz: [00:21:10] Well,
[00:21:10] Stacey Newman: [00:21:10] I think
[00:21:11] Dan Wentz: [00:21:11] that's a good place to end it unless you guys really were wanting to talk about manufacturing. That's the only thing I've got left.
[00:21:17] Stacey Newman: [00:21:17] I I'll be honest. I think that manufacturing is where we've, I've seen the biggest influx of business and, and binders.
[00:21:26] Um, so I think that's an important thing to talk about, especially in the Midwest, because that's where the standard markets they were writing those accounts, full limits, um, extremely depressed rates, uh, single carrier, low, low deductibles. And those are coming in and it's the non sprinkler plastic workers, a lot of food recyclers, woodworkers.
[00:21:56] Uh, it's a huge influx right now. And we're having accounts that they're putting up $75 million and we're coming in with a quoter shared layer program with five carriers with an increased deductible. With a BI, a average daily value deductible. And so it's, the manufacturing space has really, really changed in the Midwest.
[00:22:24] And that is where I've seen my biggest growth, uh, plastic workers, food manufacturers, recyclers they're that type of business is coming in in droves. Um, And so I think that's a very important thing to kind of talk about, um, especially in the Midwest.
[00:22:43] Dan Wentz: [00:22:43] Yeah. I'm glad
[00:22:44] Paul Martin: [00:22:44] we got a lot more of that than we are down in, down in the Southeast.
[00:22:48] Stacey Newman: [00:22:48] It amazing. It's amazing how much I'm seeing and you know, you send them out and a lot of people just don't are no, no, no, no, no. And it's just trying to find the three or four people that say yes. Um, so it's, it's been, it's been very, very tough.
[00:23:03] Paul Martin: [00:23:03] You know, Dan, uh, uh, States, you mentioned you, you hit on earlier about where's the market going for this next year?
[00:23:09] I think we, we can certainly talk about that, but just one second. Yeah. Yeah. We're going to continue to see rates go up. We're going to continue to see changes and constrictions and terms are we're going to see, just continue to see constriction and capacity from a lot of the carriers. Now on the other side of that, we are seeing new capacity, new carriers are going to be coming into the marketplace as well, whether it's here in the us, you know, whether it's in London, uh, we're seeing some capacity in Bermuda here and there that we can use.
[00:23:40] But most of those carriers, they, they don't want to come in and make a big splash. I think they want to come in. They want to take. It advantage of the, this of a harder marketplace of the marketplace that we're seeing now, they want to participate in it, not come in and jump in with both feet. They want to ease into it.
[00:23:58] I think so, as we see some of these other carriers cut their lines back, that's what we need is new capacity that can help to fill those placements out. So I think that's what we're going to say. This, this new capacity is going to be very opportunistic over the next year or two. Well, and I
[00:24:14] Stacey Newman: [00:24:14] think that's why it's very important to utilize CRC because we have access to a lot of that new capacity.
[00:24:22] There's a lot of other wholesalers do not. So, um, I've been touting that with my retail or some big time.
[00:24:29] Paul Martin: [00:24:29] So all you retailers fall for your seat?
[00:24:32] Stacey Newman: [00:24:32] Yeah.
[00:24:34] Dan Wentz: [00:24:34] Turning it into an infomercial. Paul, I like it.
[00:24:39] Stacey Newman: [00:24:39] One is
[00:24:39] Dan Wentz: [00:24:39] on a local cable channel
[00:24:42] Paul Martin: [00:24:42] pleasing you first podcast.