Top Takeaways from Advisen’s 2020 Property Insights Conference: Thoughts on 2021’s Haves and Have Nots
Last week, Advisen orchestrated a virtual exploration of the hardening commercial property insurance market and the related impact on buyers, brokers, and insurers.
In addition to a sobering forecast, our CEO, Hemant Shah, announced Archipelago’s partnership with Advisen in early 2021 to run an annual survey of risk managers of large owners of commercial property about critical issues facing the US property market and innovation in risk management and insurance. This survey will be a deep dive into the state of the industry from pain points to priorities.
While the sessions were crisp, well-run, and available in their entirety at the Advisen website, if you’re short on time, here are my takeaways and thoughts:
Day 1 Panel: Property from the Insurers’ Perspectives
Michael J. Rouse, Managing Director – US Property Practice Leader, Marsh [Moderator]
Duncan Ellis, Head of Retail Property, AIG
Shaun K. Gonzales, EVP, Property Product Leader, Global Risk Solutions, Sompo International
Michele Sansone, President of Property, AXA XL
- After consistent rate increases over the course of the last three years, the commercial property insurance market continues to harden;
- Unlike previous hard markets, this cycle is being driven by profitability challenges;
- Market conditions are driving increases in risk retention, tighter terms and conditions, and more careful underwriting;
- Given volume and staffing, submissions will rarely be underwritten prior to 45 days before renewal.
More than any time in the last decade, insurers are placing a premium on data quality in the form of secondary modifiers, TIV accuracy, and SOV completeness as well as rewarding differentiated stewardship such as robust inspection programs and investments in mitigation. In essence, risk managers are being challenged to go from buying insurance to finding the right combination of risk retention, alternative risk mechanisms, traditional insurance, and compromise to balance the convergence of budget constraints, higher rates, and constrained capacity.
The session was nicely encapsulated by Duncan Ellis’ prediction that the coming year will be a story of haves and have nots--those who have enhanced their primary and secondary modifiers, ensured their SOVs are accurate and those who have not and will likely be in for rough 2021 renewals (1:32:30 mark in video).
Day 2 Panel: The Effects of the Hard Market on Buyers
Erik Nikodem, Senior Vice President, Global Head of Property, Everest Insurance Company [Moderator]
Stephanie Hyde, Insurance and Risk Management Consulting – Real Assets & Private Equity, PE-Risk
Theresa Purcell, Director of Risk Management, Kushner
Lori Seidenberg, Global Director of Real Assets Insurance, BlackRock, Inc.
- Recurring challenge for risk managers to explain the fluctuations in the insurance markets (and avoid surprises) to internal constituents;
- While the panelists were understanding of the rate increases, they were frustrated by shrinking capacity;
- Rather than bearing across the board rate increases, risk managers had a strong preference to be individually underwritten;
- Risk managers had a different take on timing--quotes so close to the renewal dates impedes their ability to run their internal approval processes and review their options and revised terms and conditions;
- Lender mandates pose several compliance challenges in today’s hard market.
The spirit of partnership between the risk managers and their markets has been a hallmark of the "relationship-based" nature of commercial insurance--there is a spirit of mutuality and an understanding of interdependence to maintain a sustainable ecosystem. As clients are requesting individual underwriting and insurers asking for more accurate valuations and data, there is a need for additional transparency especially related to data quality, resiliency investments, and pricing structure. This transparency will clarify incentives, enhance trust, and allow for quantitative alignment to complement long-standing relationships.
Final substantive piece of content was a compelling interview of Bret Ahnell, Executive Vice President, FM Global (54:20 mark in the video). He cited sponsored research on the benefit of resilience to publicly traded companies subsequent to catastrophic events. Ahnell made a powerful case that resilience-related ROI manifests in reducing impact on shareholder value and reputational risk after an event--in other words, including the probabilistic impact on enterprise value and brand is essential to accurate analyses for proactive investments and processes related to improved resiliency.
Congratulations to Advisen for producing a first-rate virtual event and to Gary Marchitello, Chairperson of WTW’s North American Property Practice, for receiving the 2020 Advisen Property Insurance Leadership Award.
Check out our CEO, Hemant's video announcing the Archipelago/Advisen Annual Survey of Risk Managers and look for the survey to be fielded in early 2021.
Don’t have an invite? Simply ask your broker, underwriter, or colleague if they have a code to share with you. Or, request one here.
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