Trend | Range | |
---|---|---|
Non-CAT exposed | Flat to +10% | |
CAT exposed | +10% to +25% |
The direct property marketplace will continue to experience property catastrophe reinsurance challenges as insurers and insureds look to adopt buying decisions based on current market conditions.
Catastrophe risk — What is the new normal?
This map denotes the approximate location for each of the 23 separate billion-dollar weather and climate disasters that impacted the United States through August 2023
Source: National Centers for Environmental Information
As pricing continues to increase and capacity shortages persist, a philosophical shift from traditional risk transfer to a more holistic risk financing approach emerges.
Quarterly average rate trends: January 2020 — June 30, 2023
Insurers remain fully focused on valuations to demonstrate to their reinsurers that their portfolio data is robust, accurate and balanced when deploying capacity.
Index | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023* |
---|---|---|---|---|---|---|---|
ENR — Building cost index | 3.3% | 3.3% | 1.74% | 3.96% | 13.94% | 9.4% | 2.9% |
FM global — U.S. industrial buildings average | 1.2% | 5.2% | 1.73% | 1.42% | 18.40% | 11.1% | 5.3% |
RSMeans — 30 city average | 4.0% | 5.5% | 2.05% | 1.71% | 15.83% | 12.1% | 1.9% |
Marshall & Swift — U.S. average | 2.7 to 3.7% | 3.2 to 6.0% | 0 to 1.3% | 3 to 6.1% | 16 to 24.5% | 11.1% | 6.2% |
The expectation of a prolonged period of tight credit conditions accentuates the need for lenders to adequately protect their balance sheet. To put the magnitude of the issue in context there is an estimated ~$1.5 trillion of commercial real estate loans that will need to be refinanced in the next 18 months. If interest rates indeed stay “higher for longer” we can expect to see an elevated need for these types of coverages.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).