Lockton Study Finds Recent Catastrophes, Changing Models Affecting Property

In a new Market Update report insurance broker Lockton cautions that aftershocks from earthquakes in Asia Pacific and new catastrophe models create an uncertain environment for property insurance buyers.

In the report Lockton’s Jim Rubel explained that recent events “are sending shock waves throughout the global property catastrophe market and could lead insurers to restrict capacity and possibly even increase rates.”

Lockton Market Update also notes that commercial property insurers face a more daunting dilemma with the new RMS 11.0 U.S. Hurricane Model released in March. “The result has been many insurers are facing a sharp increase in their prospective CAT wind and earthquake exposures,” Rubel noted. “This means that insurers will pay close attention to their aggregate exposures and insurance capacity may be constrained or rates may stiffen at a minimum.”

Lockton’s report states: “The huge first-quarter catastrophe losses, the specter of increased reinsurance costs, and the impact of the new RMS 11.0 U.S. Hurricane Model—are shocks and aftershocks that may move the property insurance market. The first aftershock will likely hit those accounts with CAT wind and earthquake exposures and/or losses.”

It also highlights practical steps that clients can take to respond to mitigate potential increases in commercial property insurance costs. Lockton’s Andrew Rasberry reports that compiling engineering reports, documenting property valuations, and increasing emergency preparedness help insureds improve their negotiating position and reduce property insurance costs.

Source: Lockton