Prepared by:
Alexander Borg, CIC, CRM, CRIS
Vice President – Underwriting & Risk Management

Navigating the Hardened Market

Over the last three years, policyholders have experienced one of the hardest markets the insurance industry has seen in over 15 years. A perfect storm of factors include supply chain issues, nuclear jury verdicts, inflation, and natural disasters to name a few. Of course, a global pandemic acted as the catalyst of it all. The good news is that 2024 brings some new hope for relief.

The hardened market from 2020-2023 led reinsurance carriers to do more with less. Underwriters tightened capacity, increased attachments (deductibles) for insurers, and reduced risk appetite. After experiencing losses five of the last seven years, this approach resulted in a profitable year for the largest reinsurance carriers. Fitch Ratings reported global reinsurers posted a 21% return on equity in 2023. This is up 18 percentage points from the prior year.

Insurance Market Shifts in Florida

Profitability in 2023 is likely to attract additional investor capital potentially unlocking much needed capacity within the market. In addition to new investment, retrocession or simply “retros” (reinsurance for reinsurance companies) is also becoming more available.

A Glimmer of Hope: Profitability and New Investments

According to CoreLogic’s 2023 Hurricane report, NOAA is calling for 12-17 named storms, 5-9 hurricanes, and 1-4 major hurricanes to affect the United States. While this prediction is less than 2022, this report still calls for an “above normal season.”

“When there’s more retro capacity available, eventually that makes insurance for policyholders more available and affordable,” says Bill Dubinsky, Chief Executive of Gallagher Securities. It’s hopeful this influx of investment and retro availability will take the pressure off the premiums policyholders have been feeling over the last two renewal cycles.

Important to note, reinsurers are remaining restrictive with their appetite and keeping attachments higher. James Victor, Chairman of Gallagher RE comments, “There is a big demand for low-level, frequency protection and reinsurers are really reluctant to provide that. The lessons of 2023 have shown that reinsurers really don’t want to provide cover in that area and there really isn’t any capacity in the traditional sense.” Simply said, reinsurers are not looking to pick up the low-level frequency losses retail insurance companies had typically been able to lay off. As such, policyholders in the smaller and middle markets are less likely to see any benefits from the changing tide. Same still, large market insureds won’t see immediate results either. These restrictive treaties with the retail insurance carriers still keep premiums elevated.

The Road Ahead: Nearing the Highwater Mark

By no means are we over the mountain. It is fair to say, the market has only climbed to reach the edge of a plateau. Retail carriers are not rushing to change their underwriting guidelines nor turn soft on pricing. David Preibe, Chairman of Guy Carpenter echoes this sentiment. “We are near the highwater mark and pricing may start to moderate as reinsures seek to utilize the excess capital…. Pricing has normalized across reinsurance contracts. I feel we are headed towards a more competitive marketplace in greater optionality. Who knows, this business can change on the dime.”

Our research indicates policyholders should anticipate premium increases on renewals. However, the size of the increases should not be as great when compared to the past few years of renewals. It is possible to say the hardening market is coming to an end in certain classes. How long it stays hard is certainly another question. “We are now approaching the inflection point of the S-curve. How long we stay up there is a question of capital supply,” says Preibe. The industries and coastal territories that experienced double-digit percent increases on their 2022 and 2023 renewals should see less severe increases in 2024.

While greener pastures are on the horizon, by no means are we through the woods. One good catastrophic loss could set back the gains of 2023 and reaffirm the hard market. At this point, time will tell if the storm clouds are dissipating or if there’s another squall ahead.

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Business owners and asset managers with large real estate schedules rely on proper planning and advanced notice of upcoming expenses. The 2023 property insurance market poses challenges for these insureds. There are several factors that are having a significant impact on the US property insurance marketplace. Catastrophic weather events, inflation, valuations, and reinsurance costs have contributed to the challenge for large property schedules.

Unfortunately, a continued hard insurance market remains on the horizon for the foreseeable future. According to the Insurance Information Institute, Hurricane Ida (2021) was the second costliest hurricane on record, with $36 billion in insured losses. As of January 2023, Hurricane Ian is nearing $100 billion.

The frequency and severity of major hurricanes making landfall in the U.S. five out of the last six years, is arguably the largest driving force affecting the property insurance market. Each storm making landfall in high density areas with a high aggregation of property value, is a the “perfect storm” for insurers poised to experience big losses.

Hurricanes aside, wildfires on the west coast have consumed hundreds of thousands of acres, making record catastrophic losses problematic for the entire nation. On a global scale, insured losses from natural catastrophes reached $130 billion in 2021 — 18% higher than 2020. Hurricanes Ian was the back breaking straw to further harden the market. Insurance carriers are responding with restricted appetites to assets exposed to CAT losses in their effort to reduce volatility to their balance sheet.

Additional Factors Impacting the Market

Global inflation, higher interest rates, and a general economic uncertainty were unpredicted factors that resulted in increased cost of capital for insurers. As funding options tighten, rates will rise to corelate with carriers increased capital expenses. Even though inflation seems to be settling, its impact is creating a new benchmark for asset valuations and insureds falling short with properly covering their properties to replacement cost. The time of static valuation reporting is over. Carriers are reporting portfolios of insured property values are off by 30% or more.

Parallel with the aforementioned, the following has further complicated the marketplace:

  • Carriers requiring increased valuations on insured property schedules
  • Updated wind/quake models anticipate more loss exposure to carriers’ portfolios
  • Specialized programs and carriers have less capacity to deploy
  • Social inflation of jury awards (liability)
  • Nuclear verdicts (liability)
  • Supply chain challenges (business interruption)
  • Aftereffects of the COVID-19 pandemic
  • Russia/Ukraine conflict

All of which continue to compound the cost of losses.

Reinsurance Treaties

Reinsurance is the insurance an insurance company buys. Retail insurance providers are not shielded from the costs of their own insurance protection. Carriers are experiencing difficulty with their own treaty renewals. Lloyd’s of London and European treaties, have not been issued or have been delayed due to market uncertainty. The largest reinsurance providers in the property insurance market announced they will be prioritizing profitability over growth. They indicated their focus will be on eliminating all-perils catastrophe coverage. It is fair to expect carriers to apply higher deductibles or SIRs on renewal policies as well as limiting terms and conditions on policy renewals. Inflation has eroded past rate increases reinsurers have secured in 2021 and 2022. As such, it is expected for reinsurers to remain steadfast on increasing rates for 2023.

Reinsurance is expected to restrict the capacity available in the market regardless of price, terms and/or conditions offered. With restricted capacity aka limited supply of available coverage, and a 32% increase of coverage demand in the space, higher premiums are natural to follow.


Given the current factors, it would be prudent for policy holders with large real estate schedules to expect increased premium, changes to terms & conditions, and overall challenges with the insurance marketplace. Assets exposed to catastrophic risks, especially coastal and frame real estate, are due to see the biggest challenges and potentially the need to restructure their coverage altogether. Larger schedules with sizable total insured value will require tactical underwriting to secure desired limits and comprehensive terms, while also keeping premiums tolerable. With a tough property market upon us it’s important to work with a broker who has in-depth knowledge of the marketplace, strategies, carrier relationships to navigate the marketplaces, and access to resources that can get the job done right.

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