JULY ISSUE: Storm Break

Property insurance rates may have dropped, but in Tornado Alley, bargains are scarce.

Property Insurance Rates Drop, but in Tornado Alley, Bargains are Scarce


By Paul Rosta, Senior Editor

Property insurance rates can change as suddenly and unpredictably as the weather, but halfway through 2014, many owners and managers like the changes they see. Multiple factors are combining to create a buyer’s market. “The good news is that the insurance industry is in the best health that it’s ever been,” reported Kevin Madden, managing director with Aon Risk Solutions’ real estate group. Losses from Sandy, the massive storm that pummeled the Atlantic coast in October 2012, are largely behind the insurance industry.

A recent lull in large-scale disasters—floods, hurricanes, earthquakes—limited worldwide property losses to about $44 billion last year, according to global insurance broker and risk advisor Willis. That, in turn, has enabled carriers to build up more than $600 billion in reserves. “They’re starting to approach double-digit returns on equity,” commented Brian Ruane, executive vice president & leader of the real estate and hotel practice. “They have not achieved that goal for many years.”

All these factors translate into an increased supply in capacity, and, in turn, more competitive premiums for property insurance. Industry sources report that clients with strong risk-prevention strategies and good loss histories can expect lower property insurance prices. “Most buyers of insurance can expect a year-over-year decrease in rate between 2 percent and 10 percent,” reported Ruane. Willis projects that rates for catastrophic insurance renewals will decline by between 7.5 and 15.5 percent by the end of the second quarter, and pricing for non-catastrophic coverage will slip by between 10 and 15 percent. That is a welcome trend for the bottom line, since property insurance accounts for about 70 percent of the total cost of risk for real estate owners, estimated Jeffrey Alpaugh, global real estate practice leader for Marsh.

Read the full article in the July 2014 issue of CPE. Access is free!