While many sectors were hit hard by the COVID-19 pandemic, property and real estate kept going strong. That meant increased pressure on the insurance industry to provide adequate risk coverage for properties in a suddenly red-hot market – as well as coverage for the refurbishment of suddenly vacant office buildings as employees began working remotely.
IBA recently chatted with a panel of experts to get their insights into the state of the real estate and property insurance market, now and in the future.
All agreed that COVID-19 had permanently altered the insurance landscape.
“COVID-19 is something that’s not going to go – it has changed the game forever,” said Peter Flores, senior vice president of retail property at Arch Insurance. “When you look at the net migration into different states, four of the top 15 cities are located in the state of Florida.”
Brian Dove, national real estate practice leader at USI Insurance Services, pointed out the challenge of increasing vacant office spaces as people fled the cities for the suburbs.
“Vacancy obviously causes special situations and exposures that the carriers need to address,” Dove said. “A lot of these real estate owners are looking to repurpose their buildings, which then throws in additional exposures as it relates to construction. This literally changes the footprint, as well as the overall protection and exposure for that asset.”
“Because of this repurposing of so many properties, their occupancy results in a change in exposure, and that exposure also results in a coverage change,” said Joseph Morello, senior vice president of E&S property at Arch Insurance. “So, [within] the relationship of the insured, the broker, and their carrier, there has to be that migration of not only people, but it has to be the migration of insurance coverage to be able to protect the insured’s assets.”
Dove also pointed out that continued supply-chain issues have impacted the property insurance landscape.
“The supply-chain issues that we’ve felt for a number of years now have had a dramatic impact on the cost of materials, and obviously [there is] their [the construction industry’s] labor pool shortage – and then you throw in inflation on top of that,” he said. “It’s hard for the insurance market to continue to chase these costs from a valuation perspective. We’re really pushing hard as an industry to make sure that we get it right.”
Read the full interview here.