Hurricane Sandy may justify continued price increases in the property-catastrophe market, according to the Fall 2012 State of the Market Report by wholesale insurance broker NAPCO LLC. The New Jersey-based property-catastrophe specialists released the latest edition of their bi-annual report,
which examines recent property-catastrophe statistics around performance, reinsurance and pricing.
Download the Fall 2012 State of the Market Report for details.
As 2012 drew to a close, it seemed that the current high property-catastrophe pricing had peaked, leading inevitably to lower prices, according to the report. However, this “predictable cycle” was disrupted by Sandy, which may force insurers and reinsurers to reassess loss estimates and exposures for the Mid-Atlantic region. According to the report, insured losses are estimated at as much as $25 billion, ranking it the third most expensive hurricane in the U.S.
NAPCO’s Fall 2012 State of the Market Report also detailed other trends that will shape the property-catastrophe market into 2013:
• Though catastrophe losses were $82 billion in the first half of 2011, they were just $12 billion in the first half of 2012, which, without Sandy, would have further stabilized prices.
• The RMS Version 11 modeling software has been fully implemented across most insurers and prices now reflect that.
• With policyholder surplus at an almost record high of $567.8 billion as of June 30, the market is well-capitalized. However, Sandy losses will have an impact on earnings.
• Sandy may affect policy terms and conditions, as insurers are pressured not to enforce hurricane deductibles.
• After last year’s heavy tornado losses, insurers are also beginning to selectively implement percentage deductibles for hail- and wind-related risks located in the Midwest.
“The price of property-catastrophe insurance is likely to continue to move higher for at least another quarter or two and insurers will continue to tighten terms and conditions,” says David Pagoumian, President of NAPCO. “Even so, barring any additional major catastrophe losses, a new round of competitive pricing could begin sometime in 2013.”
For detailed statistics and placement considerations, download the Fall 2012 State of the Market Report.
NAPCO (www.napcollc.com) is a leading wholesale broker of commercial property insurance coverage. The company provides retail agents and brokers with an efficient, single-source independent marketing arm for difficult placements that have significant exposure. NAPCO utilizes in-depth research and sophisticated risk modeling to implement coverage and cost- effective programs for its clients. Headquartered in Iselin, N.J., NAPCO provides access to the global insurance market, including major and specialty domestic carriers, excess and surplus lines markets, reinsurers and international providers of capacity.