As 2024 draws to a close, Gallagher’s report on the US real estate and hospitality market outlines notable changes in the property and casualty insurance markets.
Insureds with well-maintained property valuations are finding opportunities to negotiate more favorable terms, including the removal of restrictive endorsements. Despite the impact of hurricanes Helene and Milton, the market has largely avoided significant rate shocks.
Gallagher reports that shared and layered (S&L) property placements are seeing the most substantial rate decreases, driven by increased market capacity and competition, particularly from London-based insurers.
Risks with high catastrophe exposures that experienced significant rate hikes in 2023 are now seeing high single-digit to double-digit rate reductions. Single-carrier placements, however, are experiencing flat to mid-single-digit rate increases, depending on claims history, as these programs continue to adjust for rate adequacy.
Emerging risks such as severe convective storms, wildfires, and derechos are reshaping underwriter priorities, Gallagher said. These secondary perils are increasingly affecting areas previously considered insulated from such risks, including northeastern states where underwriters are focusing on roof quality and wildfire exposures.
In the builder’s risk market, competition for wood frame placements has provided temporary rate relief, but rising construction material and labor costs are adding upward pressure on premiums. Gallagher emphasized the importance of high-quality submission narratives and careful construction planning to mitigate costs.
For example, general contractors may opt for NFPA 13R fire suppression systems to reduce expenses, but insurers often prefer standard NFPA 13 systems to ensure both life safety and property preservation.
Read More: Personal lines lead P/C insurance turnaround
Gallagher said that casualty insurance renewal trends are diverging across asset classes. Non-habitational risks such as office, retail, and warehousing properties are experiencing stable conditions with flat to moderate rate increases.
In contrast, habitational assets like hotels and multifamily properties face a more challenging market, with underwriters applying exclusions for risks such as firearms, sexual abuse, and assault and battery. Clients with larger portfolios may benefit from structured deductible or self-insured retention arrangements to manage frequency claims.
Directors and officers (D&O) liability insurance remains a soft market due to oversupply. Gallagher attributed this to the influx of capital during the 2019–2021 hard market cycle, which resulted in up to 60 viable markets offering D&O coverage.
While this oversupply has driven innovation, such as parametric trigger products for public D&O, the private D&O market has not experienced the same price reductions due to claims from distressed assets like low-occupancy office buildings.
The cyber insurance market continues to exhibit competitive pricing despite rising claims activity, according to Gallagher. While capacity remains abundant, potential market corrections may arise as claims trends evolve.
Meanwhile, errors and omissions (E&O) insurance has seen stable pricing, with exposure growth expected to drive premium increases as development activity resumes. Gallagher said that the E&O market remains narrower than D&O, with 10-15 insurers offering coverage.
Gallagher advised insureds to remain vigilant regarding crime coverage, particularly against social engineering scams. Clients should review coverage limits with their brokers to avoid the pitfalls of sublimits, as the crime market continues to exhibit stable pricing.
What are your thoughts on this story? Please feel free to share your comments below.
