Woodbury, NY, February 14, 2023 — SterlingRisk’s Michael Fleischer was asked to participate in Cerini & Associates 2023 Nonprofit Trends Report, where he provided an overview of the state of the insurance market.
Expect, in 2023, to see insurance pricing rise for most accounts and on most lines of business. Significant factors are affecting pricing and availability of limits.
Some of the areas that I expect to be most affected are as follows:
The Property market is one of the areas that is most dramatically being hit as a result of the catastrophic storms from this past year. While they may have been centered in areas such as Florida, the Gulf Coast, and Southeast, the affects will be felt globally. Hurricane Ian is estimated to have caused approximately $80 Billion of loss to the insurance and reinsurance industries. The reverberations from this storm will be felt in all areas of the Property Insurance market. Since the cost of reinsurance will be significantly higher this year, this will be passed off to the insurance buyer. Not only will pricing be higher, the reinsurers are looking to reduce the levels of coverage provided (lower limits). As pricing rises and limits are reduced, this makes the placement of insurance more difficult and more expensive. Carriers will also be focused on determining that building valuations are adequate in the event of a loss. These valuations are also being affected by rising costs of construction materials. Generally, this means an increase, which also corresponds to increased premiums as well. Carriers will also be looking to raise deductibles, limit coverages, thereby reducing their exposure on each risk. It will be crucial for nonprofits to begin discussions regarding renewals far in advance (minimum of four (4) months prior to expiration) so that renewal terms will be obtained prior to expiration.
Cyber claims are expected to increase to $10.5 trillion by 2025. Cyber Liability was once an extremely simple exposure to place coverage on, however, lack of attention to client’s exposures and poor systems have contributed to massive losses in the industry. Some carriers are no longer writing the coverage due to poor performance and adverse loss history. Premiums continue to rise and, in addition, insurers are looking for increases in retentions coupled with limitations to coverages being provided. Carriers are also requiring a significant amount more underwriting data and requiring cyber security controls to be in place (remote desktop protocol, multi-factor authentication, etc.). Without proper controls, carriers will limit coverage, require significantly larger retentions, or even decline to offer coverage.
The Casualty Market has been adversely affected by large judgements on Umbrella policies. Many of these losses are related to the ownership and construction related claims on real estate exposures. While these are not reflective of nonprofit type risks, anyone that owns properties has been affected by these types of claims. All buildings require maintenance and / or construction and, therefore, are exposed to these types of losses. Carriers are looking for much more scrutiny on this type of work. Contractors should be vetted to be sure that they have adequate coverages in place. The nonprofit and social service classes of business have also been affected by large sexual abuse or molestation claims. Many clients are seeing carriers looking for increases in premiums in conjunction with reductions in limits. All employees must have proper training in these areas and controls must be in place to limit exposure to these types of claims. Nonprofits should be working towards focusing on the management of risk and developing processes that will reduce exposure to loss to attempt to offset premium increases.
