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Rising reinsurance rates have had a knock-on impact on E&S property rates: RPS

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Hardening reinsurance pricing has caused rates in the excess and surplus (E&S) lines property market to harden considerably, as more and more business is forced out of the admitted lines market, wholesale broker RPS has said.

Property insurance rates are rising by high single digits to 15% on clean accounts, RPS reported, with no buyer sparred from the impact of market hardening.

In the Midwest in particular, where convective storms have been severe, putting pressure on reinsurance costs, admitted lines carriers are opting to non-renew accounts, sending risks elsewhere.

Natural catastrophe deductibles are increasing from 2% to as much as 5% of policy limit, as insurers look to share more risk with policyholders.

Brokers are contending with an array of additional terms and conditions, including new riot exclusions on retail property and mandatory virus exclusions.

Climate change has impacted both the frequency and severity of the cat risks facing property owners, RPS noted, with the insurance market in California under particular stress.

James Rozzi, executive vice president of property at RPS, said that many properties in the state were effectively “uninsurable”.

While insurance cover may be available, it is prohibitively expensive: Rozzi pointed to the example of one account “going bare because they’re not going to spend $1mn to insure a $3mn building”.

The severity of cat events in 2020 has put a strain on the modelling approaches of property insurers, with some underwriters now choosing to price as much as 40% higher than a model-generated estimate.

Rates are rising across a variety of subclasses in the property market, from habitational risks to schools and public entities.

In the hospitality sector for example, which has been hit badly by Covid-19, rates rose 20%, according to RPS data. Schools and public entities are facing rate rises from the high single digits to 15% depending on loss experience, the AJ Gallagher-owned wholesaler suggested.

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