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Survey Report

Insurance Marketplace Realities 2024 – Property

November 9, 2023

Insurers are pressured to obtain higher returns for deployment of catastrophe capacity/aggregate driving premium increases for insureds while inflationary pressure, reinsurance optimization and persistent scrutiny on valuation of assets remain.
Property Risk and Insurance Solutions
Rate predictions: Property
Trend Range
Non-CAT exposed neutral increse icon Flat to +10%
CAT exposed Increase, (arrows pointing up) +10% to +25%

The direct property marketplace will continue to experience property catastrophe reinsurance challenges as insurers and insureds look to adopt buying decisions based on current market conditions.

  • Every insured will see continued pressure at renewal on rates, values and terms. The overall risk profile of the insured (CAT/non-CAT, loss free/heavy losses, etc.) will determine the overall impact.
  • Inflationary pressures are increasing PMLs for insurers and, with CAT reinsurance rates recast at higher than recently historical rates, insurers remain diligent in balancing net exposures against robust demand for insurance capacity.
  • Insurer/reinsurer focus on limiting catastrophic loss risk coupled with combined ratio profitability and Central Bank monetary policy continues to exacerbate imbalance of supply and demand.
  • The consensus of a "new normal” solidifies a trend of hyperfocus on rate adequacy and underwriting/combined ratio profit.
  • New reinsurance capacity through capital market investment has remained largely on the sidelines due to more attractive and guaranteed investment returns in the current interest rate/return environment.
  • Monetary/interest rate policy from the U.S. Federal Reserve is seen to remain restrictive for the foreseeable future, thus keeping rates elevated until inflation has been brought in line with goals. This higher interest rate environment is steering potential capital market investments away from insurance/reinsurance.

Catastrophe risk — What is the new normal?

  • As the definition of natural catastrophe risk continues to be broadened from the traditional perils of earthquake, flood and windstorm in high hazard zones, a heightened concern from underwriters incorporates such secondary perils as severe convective storms, wildfires and freeze into the new definition.
  • Events such as Hurricane Dora influencing wildfires in Maui, and a 5.1 earthquake occurring during Tropical Storm Hilary in southern California, highlight the potential for multiple perils to occur simultaneously.
  • The 2023 Atlantic hurricane season has already seen the emergence of six hurricanes, with three of them being major hurricanes (Category 3 or above).
  • CAT losses and severe convective storm losses predominantly in the U.S. have contributed to one of the worst halves in history in terms of catastrophic losses.
  • Experts estimate that severe convective storm losses in the U.S. so far in 2023 total close to $40 billion to $50 billion, with further adverse loss development possible.
  • In 2023 (as of August 8), there have been 15 confirmed U.S. weather/climate disaster events with losses exceeding $1 billion. These events include one flooding event, 13 severe storm events, and one winter storm event. The 1980 – 2022 annual average is 8.1 events (CPI-adjusted); the annual average for the most recent five years (2018 – 2022) is 18.0 events (CPI-adjusted). The above doesn’t contemplate recent events like Tropical Strom Hillary, Hurricane Idalia, Hurricane Franklin (Bermuda), Maui/Canadian wildfires, SCS/tornado.
Map showing U.S. 2023 billion-dollar weather and climate disasters.
Figure 1: U.S. 2023 billion-dollar weather and climate disasters

This map denotes the approximate location for each of the 23 separate billion-dollar weather and climate disasters that impacted the United States through August 2023
Source: National Centers for Environmental Information

  1. Central tornado outbreak and eastern severe weather (March 3–April 1)
  2. Central and eastern tornadoes and hail storms (May 10–12)
  3. Minnesota hail storms (August 11)
  4. Rockies hail storms, central and eastern severe weather (June 21–226)
  5. Central severe weather (May 6–8)
  6. Texas hail storms (May 18–19)
  7. Southern severe weather (April 25–27)
  8. Central severe weather (April 19–20)
  9. Central and southern severe weather (June 15–18)
  10. Central and southern severe weather (April 15)
  11. Southern severe weather (June 11–14)
  12. Southern and eastern severe weather (March 24–26)
  13. Central severe weather (March 24–26)
  14. Central and eastern severe weather (April 4–6)
  15. Northeastern and eastern severe weather (August 5–8)
  16. North central and southeastern severe weather (July 19–20)
  17. North central and eastern severe weather (July 28–29)
  18. Northeastern flooding and north central severe weather (July 9–15)
  19. California flooding (January–March)
  20. Northeastern winter storm/cold wave (February 2–5)
  21. Hurricane Idalia (August 29–31)
  22. Central and southern severe weather (April 15)

As pricing continues to increase and capacity shortages persist, a philosophical shift from traditional risk transfer to a more holistic risk financing approach emerges.

  • Alternative risk transfer options to limit the trading of dollars are becoming more viable (captive, structured and/or parametric solutions).
  • For shared and layered accounts, the buffer or excess layers where the insurable values continue to impact attachment points, both capacity and cost continue to be challenged. Larger excess layers continue to become more compressed to ensure completion, thus driving more premium into the lower layers and forcing insureds to look at retaining the risk.
  • Maximum deductibles on catastrophe risks are being heavily scrutinized if being offered at all, which results in more retained risk for the insured.
  • Florida minimum deductibles and percentage deductibles are being highly scrutinized with pressure to increase beyond the traditional 5% threshold.
  • Insureds are pulling all levers to balance their total cost of risk against risk transfer (self-insurance, limit reduction, increased retentions).
  • As insurers and reinsurers alike struggle to model and price given the expanding definition of CAT, increased costs will presumably be passed on to insureds.

Quarterly average rate trends: January 2020 — June 30, 2023

  • As the property market continues to be challenging, we recommend that all key stakeholders are aware of the continued challenges and inconsistencies in rate versus the average. Budgetary expectations may fluctuate based on availability of capacity, underwriting guidelines and market conditions.

Insurers remain fully focused on valuations to demonstrate to their reinsurers that their portfolio data is robust, accurate and balanced when deploying capacity.

Industrial cost trend factors
Data table showing industrial cost trend factors
Index 2017 2018 2019 2020 2021 2022 2023*
ENR — Building cost index 3.3% 3.3% 1.74% 3.96% 13.94% 9.4% 2.9%
FM global — U.S. industrial buildings average 1.2% 5.2% 1.73% 1.42% 18.40% 11.1% 5.3%
RSMeans — 30 city average 4.0% 5.5% 2.05% 1.71% 15.83% 12.1% 1.9%
Marshall & Swift — U.S. average 2.7 to 3.7% 3.2 to 6.0% 0 to 1.3% 3 to 6.1% 16 to 24.5% 11.1% 6.2%
  • Even as valuation increases seem to be stabilizing, proper asset valuation will remain the marquee issue and equate to some 90% of all negotiations at renewal.
  • Insurers continue to combat undervaluation with the imposition of margin clauses or occurrence limit of liability endorsements (OLLE).
  • Appraisals and other back-up data to confirm the statement of values should go a long way toward providing insurers with more confidence regarding value accuracy and a greater comfort level in assessing risk — and possibly removing the clauses mentioned above.
  • NOTE: In order to ensure adequacy of coverage, existing limits and deductibles should be revisited annually as values are adjusted.

Industry spotlight

Financial institutions & professional services
  • The confluence of a challenging property insurance market coinciding with tight credit availability have led many borrowers to purchase more limited coverage than loan covenants would normally require. Commercial real estate borrowers in large parts of the U.S. have been particularly hard hit due to compressed operating margins and decreasing market value of the loan collateral property.
  • In the case of a catastrophic loss to the loan collateral property, there may be insufficient limits available to repair the property thus impairing the properties revenue stream and making loan payment default more likely. Borrowers with damaged properties in loan payment default may be more willing to allow foreclosure or to “turn the keys back” to the lender. This scenario is especially more likely in the case of non-recourse commercial real estate loans.
  • WTW has been advising bank and other non-bank lending institutions to more closely scrutinize the level of property insurance coverages that their borrowers are procuring. In addition, WTW has been assisting lending institution insureds with a suite of specialty coverage products to include the following:
    • Mortgage impairment coverage policies: Provides lenders with loan portfolio wide coverage to recover their financial interest in properties in the case of loss where insufficient borrower coverage is purchased and the lender must foreclose/repossess the damaged property.
    • Lender/force placed coverage policies: Provides lenders with coverage to protect their financial interest in a property or portfolio of properties where the borrower(s) may be current on their loan payments but purchasing deficient property insurance coverage.
    • Foreclosed/repossessed coverage policies: Provides lenders with coverage to insure up to replacement cost of a property or portfolio of properties where the borrower(s) have defaulted on their loan and the lender has taken title of the property.

The expectation of a prolonged period of tight credit conditions accentuates the need for lenders to adequately protect their balance sheet. To put the magnitude of the issue in context there is an estimated ~$1.5 trillion of commercial real estate loans that will need to be refinanced in the next 18 months. If interest rates indeed stay “higher for longer” we can expect to see an elevated need for these types of coverages.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).


Scott C. Pizzi
Head of Property Broking, North America

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