Understanding the Hard Insurance Market
Insurance industry analysts have predicted market hardening since 2019, and, so far, those forecasts have been accurate. Last month, the publication Business Insurance reported analyst predictions that insurance buyers will see price increases up to 15 percent on accounts with favorable claim activity while more challenging properties can expect even higher increases.
Owners of self-storage businesses and other types of commercial property may see evidence of market hardening at their next insurance renewal in the form of changes to pricing, deductibles, limits, and coverage. The probability that properties located in high-risk areas and those with negative claim histories may experience premium increases and potentially nonrenewal is much higher because of the present market conditions.
The hardening market conditions are generally attributed to the fact that catastrophic events resulting in billion-dollar insured losses are occurring more frequently and with increasing severity. The report U.S. Billion-Dollar Weather and Climate Disasters (2021), published by NOAA National Centers for Environmental Information (NCEI), indicates that in 2020, there were 22 billion-dollar climate-related events, far surpassing the previous record of 16 events in 2011 and 2017. Historical data from the report makes clear the problem insurance carriers are facing. During the five-year period 1996 to 2000, the U.S. experienced 26 billion-dollar events with estimated losses of $94.9 billion. During the most recent five years, 2016 to 2020, there were 81 such events with losses over $618 billion.
Insurance carriers are working to return their programs to profitability after several years of increasing catastrophic losses. While self-storage as a class may not be particularly challenging for insurance carriers, there are aspects of the property market that may affect insurance rates and terms for self-storage operations in certain areas. These include wildfires in California and other western states, flood, and convective storms such as tornadoes, hail, straight-line winds, and lightning.
The first step is to work with your insurance agent well in advance of policy renewal to review your current coverage, forecast insurance needs for the coming year, and create a detailed narrative about your business that can be presented to underwriters working on a policy renewal or new application. This additional information assists underwriters to better understand your business operation's risk profile and provide the most appropriate terms in a new or renewal quotation to include premiums, limits, and deductibles.
Because insurance carriers have various risk appetites, MiniCo has elected to work with A.M. Best "A" rated carriers to provide agents and self-storage business owners a wide range of coverage options, limits, and deductibles. Contact your insurance agent to get a quote from MiniCo.
**NOTE: the link above is information for self-storage operators and directs them to contact their agent and/or forward information to their agent to get a quote.