Lloyd’s capacity scarce for US property risks: CRC

Wholesale broker CRC has reported that little capacity is left among Lloyd’s syndicates for US property, while domestic markets are being more selective overall with an intensifying focus on valuations.

CRC forecast increased rates, higher deductibles and greater scrutiny from underwriters.

The broker said that underwriters have “placed a major focus on proper valuation for buildings” following the record loss and devaluation of the Tyndall Air Force Base in the Florida Panhandle, which was devastated by Hurricane Michael in 2018.

Although the firm didn’t include details on the Tyndall Air Force Base loss, sources have previously told The Insurer it relates to the Balfour Beatty property account, on which the ultimate claim was a multiple of the scheduled value for the location.

Commenting on buying strategies in the tight property market, CRC said insureds should be prepared to consider higher deductibles, while on larger schedules a good option may be to consider stripping out “PML drivers” from the better risks/properties on the schedule.

“While 2020 will bring new goals and budgets for carriers, they are indicating that they will continue to push rates and even higher deductibles,” CRC said Clay Dudley, member of the property practice group in Atlanta, in an update. “Terms and conditions may also change and potentially tighten, depending on the class, location, or loss history.”

Open market London will not be dispensing much capacity for the rest of 2019, CRC said.

“Many syndicates are already at or above goal or have met capacity guidelines that they cannot contractually exceed. In addition, some London syndicates are not entertaining cat risks until 2020,” the executive said.

Similar trends are being seen in the domestic markets, but not close to the same degree as in London. Aggregate issues are emerging primarily in Tri-County Florida, in Harris County, Texas and in New York City.

“Some carriers are limiting their Florida capacity to Masonry Non-Combustible (MNC) or better construction. A few carriers and MGAs are no longer offering flood coverage,” the article said.

CRC said the toughest risks include habitational, wood working, recyclers, California wildfire exposures, flood, stock throughput, older clay tile roof risks in Florida, high-value frame builders, and exterior insulation finishing in Florida.

More business is being pushed to E&S carriers as some standard lines carriers either non-renew accounts or drop from ground-up coverage to primary positions.

The E&S market is currently seeing the greatest capacity demands since the aftermath of Hurricane Katrina in 2005, Dudley said.

“As more insurers reserve capacity, many risks that have been written by one carrier, both admitted and non-admitted, on a ground-up basis will likely have to be shared or layered with multiple carriers,” the article said.