We get this question many times a day. People with no losses seeing rate increases or policy cancellations. People with older homes or businesses being canceled. Minimum age requirements being enforced, carriers closed for new business, carriers implementing minimum year built changes, carriers implementing minimum roof age changes, carriers adding water damage limitations, carriers changing their Coverage A minimums.
Here are some of the reasons why these changes are happening:
- Significant reinsurance pricing increases due to the following:
- Global catastrophe activity, including floods, earthquakes, wildfires, windstorms, etc.
- Severe losses from Hurricanes Irma and Michael
- Reduction in overall reinsurance capital due to COVID
- Trapped capital in the “retro” reinsurance markets
A recent report from Aon Benfield estimated that “around $15B of collateral remains trapped in the wake of recent major natural catastrophe events. The reduced amount of capacity available for deployment is impacting the retrocessional market”. Retrocession, or “retro”, reinsurance refers to reinsurance for reinsurers. Trapped collateral and capital from insurance-linked securities (ILS) funds and other third-party capital backed reinsurance entities was expected to be a key catalyst for 2020 renewals. In the end, this lack of available capital proved to be a rate driver for the primary markets as evidenced in part by the rate filings occurring across the board for insurers.
- Social inflation and roof claims
- Increased litigation, broader definitions of liability and insured behavior.
- The feeling that someone needs to pay when there is some kind of damage or injury, regardless of negligence.
- Weather claims on rooves which are simply aged or worn. As a result, carriers are refusing to insure rooves older than ten years. Major rate increases on older rooves and coverage limitations. Florida is among the top five states for this type of fraud.