Even before all the lights are back on in the Northeast, Superstorm Sandy is changing our view of the property market. With recovery and assessment activity underway, claims continue to escalate and the insurance marketplace is reacting.
Dave Finnis, our property practice leader, has been monitoring the marketplace reaction and is adjusting our 2013 Marketplace Realities forecast accordingly.
Before the storm hit we were looking for rate reductions on property accounts, or at least flat renewals. Now CAT-exposed property accounts are facing price increases of 5% or more. That number could be much higher depending on Sandy’s impact on the reinsurance protection for primary property carriers, Dave told me.
For insurance carriers, they really needed 2012 to be a year of recovery for the property market after experiencing record losses in 2011 ($116B). Now they are not expected to turn a profit and this will drive the pricing environment, he said.
On the whole, the industry should be able to absorb the anticipated $15B-$20B in losses in the long-term, given that policyholder surpluses reached a record $570B in this year. That said, short-term challenges remain, and coverage issues and considerations will play out over the coming months.
Many insurers are also reviewing their future position on hurricane/named storm/storm surge deductibles in the Northeast.
Ultimately, experts expect Sandy will most likely end up as the second most expensive storm behind Katrina.
More on the property market after the superstorm is in our Marketplace Realities 2013 Post-Hurricane Sandy Update publication.