COASTAL

Aggregate remains a hot topic for many U.S. coastal counties as carriers are reserving coastal aggregate for brokers with local knowledge and offices located in those communities. While reinsurance treaties were a much easier task in 2023, expect to see the market stay firm in 2024 for coastal areas. With many admitted carriers still staying clear of CAT areas, this is constraining the marketplace and should leave room for business to flow to E&S carriers. While new business rates are staying firm, the renewal environment will see much lower increases than those of 2023. Most incumbents understand there is not much room for large renewal increases without losing business to other markets or even state-run programs. Overall, we should see a much less volatile 2024, but it will remain a hard market. After a long period of flat rates, Northeast coastal property in NE, NY, and NJ should expect another year of increased rates. In addition, some carriers have pulled back on Named Storm deductibles, offering a broader Wind/ Hail deductible in its place.

Regarding Florida, domestic markets will still be more conservative in 2024 and Lloyds rates are extremely high. Typically, anything under $750,000 on the dwelling is going into Citizens. Along with Citizens, there are some newer carriers entering the state that may try to write similar business – a trend that often emerges following a quiet storm season. While that trend is not expected to continue long-term, its noticeable for now and it will be important to monitor admitted appetite changes as storm season nears. Ex-wind rates have started to inch up in FL, especially for older homes. Older properties (pre-1995 construction) have very few options for wind coverage. Insureds can expect minimum 5% deductibles and 10% in some areas of Tri-County. Valuations are being scrutinized. Many large increases in Coverage A are expected on renewal offers. $250 per square foot is the new valuation benchmark.

FLOOD

In 2024, flash flooding typically due to heavy rainfall continues to be the #1 natural disaster in the U.S. Additionally, it is now recognized that 99% of counties across the U.S. have experienced flooding. Year after year we continue to see flood events significantly impact areas that have never been impacted before. As cities and towns across the country experience the construction of new homes and buildings, this will continue to be a trend. Although the number of flood insurance policies has increased, the percentage of households carrying flood insurance remains low, especially when compared to the number of homeowners insurance policies. It is estimated that approximately 30% of paid flood losses are in “low to moderate” flood areas. Like 2023, with the NFIP continuing their underwriting and rating changes, there will be a great opportunity within the private flood space. More markets are available now than there were just 5 years ago, which is working to stabilize private flood insurance rates. Pricing remains competitive as carriers work to provide the broadest possible coverage at a reasonable rate. However, premiums can vary significantly depending on an individual property’s location and status. Along the coast, flood insurance will continue to be more expensive, and repeat flood areas often see higher prices as underwriting continues to rate properties based on loss experience.

WILDFIRE

After 2 loss-free years, markets have begun to expand appetite or enter the space, which has increased competition. The most challenging class to write in wildfire-prone areas are high value PC 10s. Outside of PC 9/10, rates are seeing approximately 5% increases over 2023, but no major underwriting or rate changes are anticipated in 2024. There is more movement from admitted markets in OR, WA, ID, and MT, which is pushing business to the E&S space in these states. With every RiskMeter update, more favorable mapping is revealed, which helps with writing more business. There has been an increase in new construction risks as they come off Builder’s Risk, and the admitted carriers are reducing appetite. The marketplace is seeing higher quality risks that include newer homes, full protection systems including interior sprinklers and water leak systems, and non-combustible roof materials as insureds are more aware of wildfire mitigation and are seeking to protect their homes. 

VACANT PROPERTY

In Florida, there are fewer vacant properties, and most markets are willing to consider coverage. Theft exclusions and low liability limits are typical. With mortgage interest rates higher than they have been in the prior couple of years, properties are sitting on the market longer than usual. Rates remain steady in the upper tiers. Included in the vacant property markets are Builder’s Risk projects which are also seeing much longer terms. Builder’s Risk placements have become more difficult lately, especially with wind on the ground up/new construction projects. The marketplace has made some adjustments with a few markets now allowing midconstruction risks.

HIGH-VALUE HOMEOWNERS

The High Value Homeowner market will continue to face challenges in 2024. Net retentions remain high for some admitted high-networth carriers, and losses could significantly impact their earnings and capital. As such, admitted high-value markets continue to cede business to their non-admitted arms to balance portfolios and offset risk. Admitted carriers are still seeking large rate increases and lowering capacity, specifically in Western states, due to increased valuations. However, inflationary impacts are not expected to be as significant across the entire sector as in recent years. Some carriers have reported uncertainty around acquiring reinsurance in CAT exposed areas; therefore, capacity will continue to be a concern in 2024.

Specifically, homes valued at over $10M remain challenging to place. With reinsurance at a premium, fewer players in the game, tightened guidelines, and less capacity, non-admitted carriers are selectively choosing the better E&S business. Policies are being tailored with reduced limits and high deductibles, sometimes layered among multiple carriers.

However, there are some pockets of market-softening. A couple of new E&S carriers have entered the space and a few markets have increased their maximum lines to assist with preferred, high-value placements. Underwriting guidelines and rate have generally stabilized across the country, except in coastal and wildfire areas. Preferred business might include protected (PC 1-6), non-wildfire, loss-free, newly constructed homes valued at over $1M. True surplus lines accounts continue to be located in coastal, wildfire, or mountain area, those that are unprotected (PC 8B-10), those with prior losses, short-term rentals, and multi-family exposures. Wind and water continue to be the two perils of greatest concern across the U.S., with wildfire posing more concern in the Northwest. Successful insureds are educating themselves, taking higher deductibles with less policy enhancements, and sometimes self-insuring portions of the risk.

Underwriters are creatively utilizing newer technologies and various mapping techniques as well as the age of the home and roof, heating systems, water shutoff devices, etc. when writing business. Geographically, the states still experiencing the largest push into the E&S market continue to be CA, CO, FL, TX, LA, SC, NC, MA, RI, NY, and NJ. The wider focus for all homeowner carriers, both admitted and non-admitted, is profitability and utilizing the very best measures to underwrite quality homeowner business with trusted partners.

LONDON MARKET

Markets have expressed a more optimistic view of 2024 but are proceeding cautiously. Programs not showing improved results in 2023 will likely experience reduced capacity. There are mixed views as to whether or not that capacity will be redistributed to other programs, or if it will be held for inflationary growth. The focus will remain on profitability with a close eye on attritional loss. Increases in both frequency and severity of non-CAT losses continues to climb and modest increases in workforce and availability of materials has not slowed attritional loss trends.

For some, reinsurance negotiations may be easier in 2024, but capacity remains limited and retentions high. Premiums have increased due to less capacity, increased frequency of weather events, tighter underwriting guidelines, greater regulatory oversight, less aggregate, and global economic forces. London syndicates acknowledge ITV progress but see more room for improvement; therefore, they are likely to continue advocating for increased ITV, higher AOP deductibles, and geographic sub-limits (i.e. wind, water, wildfire, etc.) in 2024 where the markets can sustain it.

UMBRELLA

2023 brought a downsized umbrella market, and 2024 is expected to keep pace with no word of new markets entering the excess space. The shrinking appetite now includes many farm exposures. Unless current market capacity remains stable, more business will be looking for placement - especially in Western and Southern states where rural/farm markets have reduced capacity. Of the remaining markets, $5M excess is typically the maximum available. Carriers are less interested in putting up large excess lines due to the litigious nature of U.S. personal umbrella business. Admitted carriers will offer larger limit excess policies, but only in conjunction with the insured’s homes, collections, auto, and watercraft, etc. Very few carriers willing to write non-admitted personal umbrella business on a mono-line basis remain in the U.S. Very few primary markets are offering a primary $10M. The higher limits are no longer attainable. Risks at the lower limits ($1M - $5M) with clean driving history are still able to obtain favorable terms. However, markets are scrutinizing youthful drivers, those with adverse MVR activity, and drivers over 70 years of age.

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