Everyone likes to deliver good news, and for my real estate, hotel and gaming clients, I’ve got some: It’s a buyer’s market when it comes to insurance. It’s just basic economics:
- Supply is up – lot of insurers out there wanting to sell insurance.
- Demand is coming back from the lows of a few years ago, but isn’t quite roaring yet.
- Supply is higher than demand and bingo: buyer’s market.
That doesn’t necessarily mean, however, it’s a totally easy ride. We’ve got some potholes in the road ahead. I went over all this with my colleague Colleen McCarthy in a WillisTV interview recently. Here are the highlights. (And click here if you want to see the video.)
The general trend in the sector is toward a higher duty of care. That means expectations are rising as far as companies taking care of people and property. When stuff happens – and it always does – those higher expectations tend to work like a wake up bell to the plaintiffs’ bar.
Two factors make this an issue for my clients.
- Real estate owners are increasingly doing transactions with their tenants online, meaning sensitive information, including the rent transfer, is potentially exposed.
- My hotel and gaming clients do a lot of POS (point of sale) transactions. That means they’re taking credit card info, like our friends in the retail sector, and we know what’s happened there. It’s starting to happen in my sector.
- Make it three factors: cyber intrusion seems to be harder and harder to stop.
At its height, before the Recession, securitized debt funded something like $250B in real estate transactions. We’re not back to those levels, but we could be getting there. This time, underwriters are looking at this kind of funding with a much more conservative eye.
This is a tough line of business for my sector. Underwriters have made money in only two of the last 20 years. Some are getting out of the business altogether. That puts pressure on buyers that we aren’t seeing in the other lines.
Potholes aside, good driving conditions are good overall. Kind of like on the New Jersey Turnpike, where they finally widened the road between exits 6 and 9. Better than ever crossing the Garden State.