2017 turned out to be one of the costliest years for natural disasters in recent history. As a result, carriers are anticipating hefty increases in reinsurance premiums on the horizon. And while rate hikes are never a welcome sight, there is a silver lining. In the last six years, home remodeling has increased by nearly 30%. Homeowners have updated major home components, increased renovation activity, and updated their roofs. Roofs in particular can have a huge impact on what carriers pay in reinsurance premiums.
Because properties are constantly changing, carriers have shared their worries about not being on the pulse of these changes, and being able to leverage them as drivers within CAT models. Carriers who aren’t privy to these updates will often default to year built when reporting the age of a property’s roof. When year built is used as the default roof age modifier in models, it grossly overestimates roof age. In turn, carriers end up with inaccurate PML calculations, thus overpaying for reinsurance.
Even if a carrier captures roof age today, it’s critical to keep those roof ages up-to-date as roofs are constantly being updated. The sum of all new roofs on their book could result in inaccurate PML calculations if old information is used. To make sure PML calculations are accurate, the most recent known roof repair and replacement dates should be leveraged.
Other meaningful construction activity such as installations of opening protection and knowing roof materials can also be beneficial when it’s time for reinsurance negotiations. The permitting process that accompanies this type of work provides empirical evidence that carriers can use to feed CAT models and ultimately secure better reinsurance terms.
Beyond reinsurance, knowing when properties are changing and how they’re changing can help carriers price more competitively, underwrite more efficiently, and lower loss ratios across the board.
For more information on how BuildFax property history and condition insights can help support your team, contact us today.