Aon study reveals property insurance rates remain on the rise
A report released by professional services firm Aon plc, confirmed that during the first quarter of this year, the property insurance market reflected a trend of rising rates and more cautious underwriting by most insurers.
The first quarter of 2020 represented the 10th consecutive period of increases in property rates, according to the “2020 Property Market Dynamics” report.
Despite the fact that many countries are in the process of economic reopening’s, the impact of COVID-19 continues to echo across industries, especially the property insurance market.
“Although property insurance rates showed a slight decrease during the first quarter of 2020 compared to the fourth quarter of 2019, we are facing the longest period of rate increases since 2001,” said Karla Ruiz-Cofresí, commercial risk manager at Aon.
“We continue to be in a ‘hard market’ and insurers are being more selective in the risks they want to take and more rigorous in their underwriting requirements. Deductibles have been stable,” Ruiz-Cofresí said.
“On the other hand, clients remain conservative, continuing with the same coverage limits; they also want to know more about the risk capacity of the markets, as well as any other innovative products available for their operations,” she said.
With the global economic impact that the COVID-19 health crisis has caused, market conditions are expected to persist for the rest of 2020, according to the report. In addition, given the predictions of a particularly active hurricane season in the Atlantic, the probability of losses increases, and conditions may extend until 2021.
“At Aon, we began answering coverage questions about the impact of COVID-19 from the initial outbreak in Wuhan, China in late December 2019. Although COVID-19 has dominated headlines for the past few months, cyber risk is also an important focal point for subscribers, due to the pressure remote work imposes on IT risk policies,” Ruiz-Cofresí added.
According to previous industry statements, property policies require physical loss or direct damage to insured property as a result of an insured danger. Some insurers are likely to argue that the introduction of a virus does not constitute direct physical loss or damage to the insured property. Additionally, insurers may soon point out exclusions that include loss or damage resulting from delay, market loss, indirect or remote damage.
Alternatively, a policy might contain a contamination exclusion that incorporates the appearance of a virus, disease or disease-causing agent in the definition of a contaminant. According to the report, the market provides for approval of the Lloyd’s Market Association endorsement for infectious diseases, LMA 5393, issued on March 25, 2020.
This would be an exclusion in the face of “losses, damages, claims, costs or expenses, among others, in relation to cleaning, detoxifying, eliminating, controlling or evaluating an infectious disease or any insured property that is affected by the contagious disease.
“We’re monitoring the development from several legislative bodies related to financial relief measures, the response of insurance and reinsurance companies and federal proposals,” said Eduardo Criado, Aon’s CEO for Puerto Rico, Venezuela and the Caribbean.
“It’s essential to know your risks, meet with an expert and review each insurance policy in its entirety, to determine the available scope of coverage,” he said.