Catastrophe reinsurance rate increases didn’t come to fruition in 2018, however, this year Florida reinsurers are expecting a shift in the market. Analysts reported catastrophe reinsurers have added inflation factors into their pricing following two years of impactful hurricane seasons and external pressures from increasing loss creep. The effect of loss creep was made particularly apparent after recent Florida hurricanes when some carriers saw claims costs double from assignment of benefits (AOB) complexities and higher loss adjustment expenses.
After two years of milder Florida catastrophe reinsurance renewals, carriers that leverage new data sets and technologies to validate portfolio risk will enter these discussions with the resources to negotiate a fair rate while ensuring full coverage of their book of business. More so than in years prior, analysts argue catastrophe reinsurers are prioritizing carriers that provide increased transparency into the risks on their book.
Hurricane Recovery is a Major Blind Spot for Carriers
While 2019’s hurricane forecast suggests slightly below-average activity, states impacted by 2018 hurricanes are still experiencing the tail end of rebuilding activity. The average rebuilding period for a severe hurricane is 10.7 months, according to a recent report by BuildFax. This is particularly tangible in states like Florida, where recovery activity is almost continuous as a result of back-to-back severe weather events.
For large storms with mounting costs, accurate data can prove invaluable. Following Hurricane Irma, BuildFax analyzed claims data for a major Florida carrier and found that 50% of properties had not completed repairs. This is a major blind spot on a carrier’s book of business, as properties that go without repairs see increased risk heading into the next hurricane season.
As reinsurance becomes an increasingly data-driven industry, carriers can use this to their advantage. Leveraging a trusted third-party data provider can help provide a clear understanding of how hurricane recovery activity has impacted an insurance carrier’s book. With the most up-to-date data points to feed critical modifiers, like roof age, year of construction and effective year of construction, BuildFax helps carriers recognize their exposure to drive more accurate PML calculations.
Preventive Maintenance Activity Sheds Light on Opportunities for Better Rates
Damages from increased hurricane activity can also be mitigated with the right preventive maintenance. BuildFax research found that in 2018 alone, storm shutter installations, which lower the extent of hurricane damage on a property, increased 24.81% in the U.S. On a state-level, these increases were accentuated in hurricane-prone states. Year over year, storm shutter activity grew 38.83% in Florida, 212.86% in North Carolina and 192.24% in Texas.
Given the substantial increase in preventive maintenance activity, carriers may find their book is less risky than initially anticipated.
Interested in incorporating BuildFax property intelligence into your PML analytics and assessments ahead of June 1 placements? Contact us today for more information.