Property and Casualty Insurance Market Update

For several consecutive quarters, reinsurance costs have increased, and capacity has diminished, making 1-1-23 renewals very difficult for insurers.

Kevin Mahoney



Increase in Reinsurance Costs

For several consecutive quarters, reinsurance costs have increased, and capacity has diminished, making 1-1-23 renewals very difficult for insurers. The significant increase in cost to insurers has continually driven retail premium into double, if not triple digit increases for the end, retail insurance buyer.  The average insurance carrier experienced a 30% to 80% increase in its reinsurance cost.  What’s more, poor underwriting results and shrinking capital in the insurance marketplace has added to the market frustrations.  As a result, the market’s reaction to 2023 has been to cut capacity and increase premiums.  

Severity of Losses

Recently, AM Best revealed that the U.S. Property and Casualty market reported net underwriting losses of $24.3 billion in 2022, nearly quadruple the total of losses from the previous year.   These losses were exacerbated by climate change events such as California wildfires, severe windstorms, major freezes, and flood events.

Diminishing Capacity

In response to the increase in costs and underwriting losses, direct insurers are reducing their appetite and limiting their capacity.  Many carriers have already reduced their capacity by as much as half over the coming year.  A particular risk may have had 10 carriers in the past, but now we are seeing that number rise to 20 because capacity has been cut so drastically.  Additionally, some insurers are increasing their minimum premiums in order to reduce the number of submissions they are receiving.

Valuation Pushback and Inflation

Insurers are also putting additional pressure on valuations, requiring insureds to update portfolio values due to rising inflation and increased costs of construction.  It’s not uncommon to find that insureds have not increased the portfolio values in 8 to 10 years.  Coupled with a material increase in construction costs means many portfolio valuations, according to insurers, are significantly undervalued.

Koru Solutions

While the market is challenging, Koru is here to help our clients get through this.  The following guidance is helpful in a challenging market.

  1. Early Communication.  Koru encourages its clients to start the renewal process sooner, specifically by communicating early with incumbent carriers.
  2. Loss History.  As part of the early communication to carriers, we suggest our clients gather historical and accurate loss history.  Providing the right information upfront can preempt insurer premium increases.
  3. Value and Replacement Cost Data.  We encourage our clients to review their values and make sure they’ve been updated appropriately.  Koru has third party valuation experts it uses to help create a standard benchmark for values.  In addition, these third parties often have data regarding replacement values which include current construction costs.

Many struggles in life can be solved by recognizing the issue sooner rather than later.  Procuring insurance is no different.  Koru is here to help navigate you through these challenging times.