🏙️ Association Property Insurance Renewal Season Facing Serious Headwinds

Thank you to Matthew Sengsourinh, Senior VP, GlobalPro, for important contributions to this edition.

The individual homeowner property and casualty insurance market has recently been challenged with a wide variety of issues:  insurer carriers becoming insolvent, fraudulent roof replacement schemes, a mountain of auto claims, and a large number of Insured’s prevailing over Insurer’s in court.  All of these factors is making the overall environment very difficult for commercial property and casualty policyholders like luxury condominium Associations. Interestingly, these issues have very little to do with the state’s hurricane exposure and Hurricane Ian last fall.  

Primarily driven by economic factors and market capacity, commercial property and casualty (P&C) premiums are projected to rise between 40-50% in June 2023. Along with pressure from the homeowner’s P&C market, much of the increase can be directly attributed to rising costs, rising property values, rising interest rates, and the inflationary environment we are currently experiencing. Labor and material costs have a strong correlation to the rise in property values, much like property taxes.  Even though Florida Governor DeSantis called a second special session in late 2022 to address rising premiums, the property market continues to struggle. The legislative changes have had little to no effect on the market to date, and the forecasts of premium increases, along with ongoing renewals in 1Q23 continue to prove otherwise.

Unfortunately, such an environment with a wide array of factors creates a dynamic where Insurance carriers often tell the market one thing and then tell their shareholders something very different.  Against the backdrop of a painfully hard homeowners’ market, parent companies of these Insurers continue to earn double digit earnings, while also guiding future earnings forecasts higher. As one example, Chubb recently reported its results for Q4 2022.  P&C net premiums were up 13% (in USD).  Full year P&C underwriting income was a record year for Chubb, where they recorded $4.56 billion, a 23.2% increase year-over-year.  This record year is further reflected throughout the balance sheet, where core operating income was up 15.9% or $6.46 billion. Going further, Chubb explains that net income was down in 4Q22 it was primarily because of losses from the investment side of their balance sheet. In other words, rising rates are driving their fixed income investments lower.  CEO Evan Greenberg hailed the quarter as “strong.”  He goes on to state that pricing conditions in P&C remain favorable, meaning premiums are rising, and the Insurers earnings should increase throughout 2023.

As a condominium Board Member or General Manager (CAM), be sure to ask your insurance agent for the Association about these important impacts in the homeowner market supply. Also prospective buyers or unit owners need to ask the right questions that their condo or soon-to-be-called-home has an association property insurance carrier with a high financial rating, high liquidity for current and future claims to be paid, and reliable reinsurance.

Additionally, there are many resources available to Associations and their Boards that help inform and guide the Association through this environment.  About 60-90 days prior to renewal (or as soon as possible), Boards and CAMs should coordinate a meeting with the Associations broker or agent to ask about the upcoming renewal.  Ask your agent if there is anything the Association can do to mitigate any potential increases, such as making physical improvements to mitigate risks or updating roof or glass information. General maintenance, or anything else the Association can do to update its property may help. Instead of continuing to pay a higher premium on multiple years, the Association should contemplate whether simple capital improvement projects are more financially prudent, and act on it as quickly as possible.

A final yet very important consideration is if there are any Association claims on their loss runs that have been underpaid, should be withdrawn, or are erroneous and should be removed. Request an up-to-date loss run breakdown from your Insurer right away. Not only might this information provide insight into where capital improvements may be needed, there are specialty firms who represent, advocate, and consult Community Associations on matters like these.

Representing over 1200+ community associations, GlobalPro is one such resource. Insurance coverage experts and insured advocates such as GlobalPro provide policy and loss run reviews on a consultative basis, normally for a fee.  Loss run audit information can be extremely helpful to a Board and GM.  Send an email today to [email protected], and mention "Condo Leader" for both a complimentary policy review and loss run audit.

The Sun-Sentinel featured on Friday, 2/17/23, how United Property and Casualty is yet another example of a Florida homeowner property insurance carrier going into receivership, due to insolvency.  For more details, read the full article and additional relevant articles below:

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