The commercial property insurance market is facing difficulties, leading to an increase in premiums. There are several factors contributing to this trend:
Catastrophe losses
Catastrophe losses are causing stress to the industry due to the frequency and severity of natural disasters, leading to global insured losses of over $100 billion annually in five of the past six years.
Reinsurance expenses
Reinsurance expenses have increased due to catastrophic events, making primary carriers more selective, resulting in the need to pass on higher costs to customers.
Underinsurance
Underinsurance is a problem as inflation drives up the cost of materials and services, yet only 43% of business owners have increased their policy limits to reflect the higher replacement costs accurately.
Property replacement costs
Property replacement costs have risen due to higher construction and machinery costs, and contractors are facing materials shortages and supply chain disruptions.
Skilled Labor Shortage
There is a skilled labor shortage, with higher wages and salaries leading to increased reconstruction costs, and nine out of 10 contractors struggling to find skilled labor, leading to project delays and increased business interruption losses.
Property Rate Increase Need
Escalating loss trends have outpaced rate increases for years, and carriers are expected to raise rates again this year to close the gap.