Property insurance rates fall, moderate as competition heats up

Commercial property insurance market conditions continued to moderate at midyear renewals, with some policyholders seeing rate decreases and others only single-digit price hikes, depending on their location, loss experience and program structure.

After years of hardening market conditions, insurers are expanding catastrophe capacity, driving greater competition, brokers say.

Buyers will likely see more rate relief through the end of the year, but a major insured hurricane loss could affect Jan. 1 reinsurance treaty renewals and slow the market softening, experts say.

Rate reductions began in mid-March and have accelerated into double-digit territory for some buyers as insurers look to write more catastrophe business, said Vincent Flood, New York-based U.S. property practice leader at Aon PLC.

The average rate change on Aon’s property book was a 3.4% increase in the first quarter, down from a 9% increase in the fourth quarter of 2023, Mr. Flood said.

Through June, the average rate change approached a 10% decrease, led by shared and layered business, where large policyholders work with multiple insurers, he said.

Market competition is “fierce,” with surplus capacity leading to rate decreases for best-in-class risks, said Michael Rouse, New York-based U.S. property practice leader at Marsh LLC.

In some instances, accounts with catastrophe exposures saw the largest decreases, Mr. Rouse said. “The decreases in our shared and layered book certainly are outpacing our single-carrier business,” he said.

Even accounts with significant losses had a “fair” renewal, receiving low-single-digit rate increases, he said.

Catastrophe exposures

The market is more stable, but pockets of disruption remain, said Jeff Buyze, Fort Lauderdale, Florida-based vice president, national property practice leader, at USI Insurance Services LLC.

For wind-exposed properties in some areas of Florida and Texas, the market has eased, he said. Most renewals have seen single-digit rate increases for single insurer and shared and layered placements with or without catastrophe exposure, he said.

Mr. Buyze noted that if an insurer on a single-carrier placement reduces its limit or declines to renew, the policyholder often must obtain additional capacity from the excess and surplus lines market, which comes at a higher price.

“Typically, those decisions are being made because of severe convective storm exposure, wildfire, issues with the quality of the risk, recommendations not being completed and then losses,” he said.

The property insurance market is more favorable for buyers this year, said Martha Bane, Glendale, California-based senior managing director of the North America property practice at Arthur J. Gallagher & Co.

“We continue to see rate increases on cat-driven property, but at a much lesser level, more in the single-digit range, with some portfolios either having a flat renewal or a decrease in some cases. It definitely varied by client,” Ms. Bane said.

For distressed risks such as multifamily, wood frame or accounts with losses, renewals continued to be challenging, she said. “Those clients probably received double-digit rate increases, but not at the same level of last year — in the teens, probably,” Ms. Bane said.

Will Lehman, global director of risk management at Cook Group Inc. in Bloomington, Indiana, said the company saw a single-digit rate increase on its property program, which renewed March 1, versus a double-digit increase the prior year.

Cook, a family-owned company, has a diverse property portfolio across the United States in life sciences, medical devices, resorts and real estate, with total insured values of approximately $2 billion.

“Recent-year rate increases and insurers scrutinizing the reported insurable values seem to now be bringing us into a more consistent landscape from a coverage and rate perspective,” said Mr. Lehman, who is also a Risk & Insurance Management Society Inc. board member.

Capacity increases

Increased competition is being driven by more capacity in the market in general, as existing property insurers look to increase lines and grow market share, experts said.

For many insurers “the cost of risk is adequate, so they are looking to deploy their capital and to grow market share,” Mr. Rouse said. There are a handful of new entrants, but most of the market growth is from established insurers, he said.

“The pendulum has swung in favor of insureds. Last year, we were struggling to finish programs, and this year, we could be 50% to 100% oversubscribed,” Mr. Flood said.

Some policyholders are buying more coverage, but insurance costs are still at an all-time high, Ms. Bane said. “Sometimes they’re choosing to buy more because the limits are available. Sometimes they’re just maintaining the limit they had. They’re still trying to manage the cost,” she said.

Some buyers are increasing wind limits to as high as $400 million, from $300 million, Mr. Buyze said. “We are seeing some of that, but there’s still a heavy interest in retaining more risk and alternative risk strategies like captives, fronting and especially deductibles,” he said.

This year’s Atlantic hurricane season could disrupt market stability, experts said.

It would take an insured loss north of $50 billion to potentially influence treaty reinsurance renewals come Jan. 1., Mr. Flood said.

“That could just mean that it would stop the rate reductions and flatten it out, or you could see a nominal rate increase,” he said, adding: “It would take something much north of that to really turn the market back to being hard.”