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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Since 2020, insurance carriers have increased premiums due to the uncertainty the pandemic created. Now in the post-COVID era, the economic and social fallout has led carriers to significantly increase their rates. There’s no sense in sugar coating it, here are the reasons why.

Spotlight on Inflation

Yes, it’s true, inflation has come down off its high of 9.1% in June 2022. However, inflationary concerns have carriers worried about underweighted balance sheets. In late 2022, a McKinsey report estimated that inflationary costs added approximately $30 billion of unexpected loss expenses industry wide. Increased medical, construction, repair, and overall labor costs are all driving up loss expenses. These increases push actuaries to increase the rates underwriters apply to premiums.

Inflation has also driven up ratable exposures. Many manufacturing, distribution, processing, and construction insureds are seeing their top-line revenue increase, not due to having more work or producing more products, but rather increased pricing to reflect inflationary expenses.

Solution: A candid and detailed conversation with your trusted insurance professional affords the underwriters a clear picture of what is going on in your business. With today’s market conditions, creative underwriting and leveraging strong relationships are key to successfully keeping premiums manageable.

Strained Investment in the Reinsurance Space

Another critical factor driving premiums, especially in the excess casualty (liability and umbrellas) space, is the limited capital invested in the reinsurance market. Private equity and investors have been putting less money into the reinsurance carriers because the returns have been diminishing as compared to other investment options. The global inflationary environment has eroded returns, reducing the incentive for investment. The lower capital injected into the industry has limited coverage offering availability (supply), while the demand for umbrella / excess liability coverage has grown, thus premiums have increased.

Investors are also changing their risk appetite favoring upper tiers on liability towers. Iny ears past many carriers were offering excess liability immediately after the primary liability limits for around 35-45% of the primary liability premium. More and more carriers are only interested in offering terms after the first $5MM of limits. The limited insurers now offering lead excess or “buffer layer” are now seeking 65-100% of the primary premium.Since 2019 excess casualty premiums are up 300-400%. It’s becoming more common that three to four carriers are needed to achieve the same limits of liability a single carrier could offer just three years ago.


Public Opinion Drives Settlements

The other reason premiums have increased is because of “social inflation”and “nuclear verdicts” when it comes toj ury awards. Some carriers refer to this as“legal system abuse”. The industry is seeing plaintiffs file more lawsuits when compared to the last few years. While some suits may be frivolous or unfounded, carriers are required to defend these suits, contributing to the loss expenses.

As it pertains to the excess liability and umbrella market, jurors are awarding plaintiffs significantly higher awards than ever before. Many of these awards are breaching the primary general liability policy and impacting the excess liability & umbrella layers. Several carriers (Travelers, Liberty Mutual, Hartford, State Farm, etc.) have reported 30-40%increases in awards as compared to a decade ago. This is due to a few a factors. The public sentiment of corporations and insurance carriers in specific judicial territories (Metro NY,California, Cook County, IL, Metro Atlanta to name a few) are less than favorable. Influenced by mainstream and social media reporting unscrupulous business practices of some corporations, this negative public perspective influences juries, often viewing a large award as justice against corporations or institutions.

Additionally, millennials and Gen Z generations are now sitting on juries. These youngerjurors frequently have misconceptions about reasonable awards due to portrayals ofaffluence at their fingertips on every social media platform.

Lastly, the rate of information exchange is unprecedented. Plaintiffs’ counsel, jurors, andspectators communicate the status of the case in real time, often with their respectiveinherent biases. This immediate information exchange influences jurors to issue larger thannormal awards.

Nuclear Verdicts and Litigation Investment

The Chubb Bermuda 2022 Report highlights the growing settlements in various sectors, including manufacturing, real estate, and construction, with some exceeding $1 billion. Marathon Strategies calculates the median verdict against corporate defendants has increased by 55% since 2010, with total corporate nuclear verdicts skyrocketing from $4.9 billion in 2020 to over $18.9 billion in 2022. The average nuclear verdict against corporations has doubled in the last 12 years, reaching a new mean of $41.1 million.

The reason this new factor is making such an impact is due to recent investments in litigation funding. This allows plaintiffs to hold out for higher settlements and additional resources to be deployed by plaintiff’s counsel to solidify investor returns. In 2021, Chubb reported litigation funding surpassed $17 billion with no signs of slowing.

What to expect for 2024


With the insurance industry losing $27 billion in 2022, casualty carriers are seeking 8-12% increases with the expectation that their own loss costs are going up 9% on average. For habitational and construction industries, most specifically in the most litigious territories mentioned above, expect steeper increases.

The challenges facing the US casualty insurance marketplace in 2023 are multifaceted, driven by inflation, legal developments, and evolving industry dynamics. It is essential for business owners to stay informed, adapt strategies, and engage in open dialogue with their insurance professionals to navigate these complex waters effectively.

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Challenges in the Personal Insurance Marketplace

The personal insurance marketplace (homeowners and automobile alike) is becoming more and more challenging due to several factors; increased cost of construction materials, supply chain & labor challenges, legal system abuse, and restricted treaties with reinsurers are just a few. Combined with the major natural disasters the country has seen from coast to coast – forest fires & mudslides in California, Hurricane Ian in Florida, hailstorms/freeze ups in Texas, etc.- the whole industry is seeing higher premiums, limited carrier appetites, and more stringent underwriting from nearly every personal insurance carrier.
The homeowners’ insurance marketplace has proven difficult for even the largest home insurer in the country (2022), State Farm.
In late May 2023, State Farm announced they will no longer be offering new policies in the state of California. California saw more than 7,490 wildfires in 2022. Ina statement on Friday (June 2nd), State Farm commented, “[this market is the] hardest in a generation.”
Regardless of their 18.4% market share, pulling out of California market was a critical decision to protect the company’s bottom line. In a prepared statement, State Farm said they, “made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”

Insurance Market Shifts in Florida

On the east coast, Florida has seen several carriers significantly reduce coverage offerings or leave the state entirely. In 2021, 3 homeowners’ carriers suddenly departed the market, leaving more than 54,000 policy holders scrambling (Southern Fidelity, Gulfstream Property & Casualty, and Universal Insurance Co of North America). While catastrophic weather losses were a considerable factor, the driving reason for the exodus was the rampant lawsuits filed for roof damage claims by attorneys and dishonest roofing contractors, not the actual policy holders. Many of these suits are unsubstantiated. Nonetheless, carriers are obliged to respond, defend, litigate, and ultimately settle. In 2020,Florida insurers reported to have lost more than $1.7 billioncollectively. Earlier this year, more than 250,000 lawsuits were filed the day before Governor DeSantis signed House Bill 837 and Senate Bill 360 into law. Both bills are designed to help reduce the number of frivolous lawsuits in the state, driving the state’s inflated insurance rates.

NOAA’s Hurricane Predictions and Impact

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.”

The Metro NY Area has 4.3 million single and multifamily homes at risk to hurricane force winds. This exposes insurers in the New York territory to more than $2.4 trillion in damages should another major storm slam Long Island and the surrounding areas. The coastal nature of downstate New York, Long Island, and southern Connecticut coupled with the concentration of high value homes poses a unique threat the actuaries are pricing into the market.

Global Influence on Local Insurance Rates

While one may personally never experience a loss in their individual neighborhood, insurance is a global industry. The basic principles, the law of large numbers and spread of risk affect every policyholder, even in the most innocuous locations. The reinsurance market is global. As such, national losses affect local rates.
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.”
The Metro NY Area has 4.3 million single and multifamily homes at risk to hurricane force winds. This exposes insurers in the New York territory to more than $2.4 trillion in damages should another major storm slam Long Island and the surrounding areas. The coastal nature of downstate New York, Long Island, and southern Connecticut, coupled with the concentration of high-value homes poses a unique threat the actuaries are pricing into the market.
Pure Insurance Company released on May31st, their most affected states. While some states are seeing flat rate changes, others are experiencing double-digit rate increases. Wisconsin can expect to see a 12.9% rate increase, Michigan’s overall rate effect is 14.9%, Texas is seeing an overall rate effect of 19.9%.


Despite these challenges, a qualified independent agent can help navigate you through the turbulent times we are seeing in the personal insurance marketplace. Exploring coverage options from regional carriers, with limited or no exposure to catastrophe and litigious territories, could be a potential solution. Increasing your policy deductibles is another way to stem premium increases. Also, consider securing coverage for your home and auto with the same carrier. The carriers’ multi-policy discounts could mitigate premium increases. Nonetheless, a candid conversation with your trusted broker about your assets, exposures, and risk tolerance is the best way to ensure you maintain the peace of mind you rely on should disaster strike.


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