The Habitational Insurance market is finally stabilizing after a volatile period, offering relief to brokers and property owners alike. With reinsurance rates remaining steady and increased market competition driving down premiums, the landscape is shifting to more favorable coverage and pricing options.
However, challenges persist, particularly for older properties and those in high-risk areas. In this expert Q&A, Teresa Cowper, Broker, Property, Burns & Wilcox Brokerage, Atlanta, Georgia, shares insights on the current state of the market, emerging risks, and best practices for securing comprehensive coverage in an evolving environment.
What is the current state of the Habitational Insurance marketplace and how has it evolved in recent years?
T.C.: After the last two to three years of volatility, the Habitational Insurance market has finally stabilized. We now have a solid reinsurance marketplace, with more stable property valuations. There is more capacity, which is helping bring pricing down—in many cases by single-digit to double digit percentages or more. Deductibles are remaining static. There are new programs and carriers coming into the fold, and a lot of competition at this point in the Habitational market.
What are some of the most significant risks facing the Habitational sector today?
T.C.: Age of construction and a lack of updates are the biggest risks. We have many insurance carriers that will not consider older properties unless they are fully updated. There are limited insurance companies willing to offer support on the older garden style apartments and we find the rates and terms to be less competitive than newer constructed property accounts.
One example is aluminum wiring. It is an issue because not all buildings have been updated, so there is greater exposure to electrical arcing and fire in the panels. For older buildings that have not been updated, property owners can consider remediation of the wiring. There are various methods to accomplish this better protected exposure which are more favorable to insurance companies to consider the risk. Despite these challenges, there is no risk too small or too difficult for us to find a solution for. It is typically a question of whether the property owner can afford it. That is our job—to find a solution for every client.
Why is more of this business shifting to Excess & Surplus (E&S) lines?
T.C.: Standard markets are not renewing certain risk exposures like aging properties and certain geographic areas such as convective wind locations and wildfire exposures. We are seeing a shift in the market and that brings more opportunities to Burns & Wilcox Brokerage to partner with retail agents and provide solutions in the E&S marketplace.
Are there any emerging risks that brokers should be aware of?
T.C.: Over the last five to six years, there has been an increase in the construction of podium-style buildings which are single large-scale buildings. Due to the larger footprint of these buildings, small losses such as a water leak, can cause larger losses.
What coverages are commonly overlooked in Habitational Insurance?
T.C.: The biggest overlooked coverage is Flood. We are seeing a lot of change in our weather environment now and because of that, a property may not be in a flood zone but could experience a 100-year to a 1000-year weather event. A traditional property policy excludes Flood of any kind.
Debris removal is another overlooked coverage. Typical property policies have very limited extensions of coverage for debris removal, and some have no coverage at all. In the aftermath of the California wildfires and coastal hurricanes, for example, there has been an enormous need for debris removal after a catastrophic event. In these cases, there is no way to quantify the exposure of the risks involved. Agents and insureds should discuss this exposure during coverage presentations and at least have a conversation about it.
Some other overlooked areas include coverage for Equipment Breakdown caused by power outages or power failures due to catastrophic storms, and Ordinance & Law, which covers the cost to rebuild according to your city, state, and county building codes. If you have an older building and you have added costs to rebuild it a certain way, your policy may not provide for that. Insurance carriers may be able to add Ordinance & Law coverage under their policy, depending on the risk itself.
Many carriers are placing wind deductibles in convective wind areas, just not in hurricane-prone areas. As a result, a property owner may be left with a larger retention. The solution is to secure a Wind Deductible Buyback, which helps to reduce the burden of their deductible in the event of wind or hail damage.
Can you share a real-world example that illustrates how challenges in the Habitational Insurance market can be effectively addressed?
T.C.: An admitted carrier non-renewed an apartment management program area due to the change in appetite because of convective wind exposure along with aging buildings. The risk was loss-free, however, the carrier no longer wanted to write them. The total value was roughly $65 million with a dozen apartment complex locations. It was an example of a risk that came out of a standard market that no longer felt it met their appetite.
There were no carriers willing to offer quotes due to values being over $50 million, combined with the age and location of the properties. We marketed the risk and offered both a layered program and a single-carrier quote program in the open brokerage marketplace to cover the full value. Our carrier was able to offer favorable terms and rates based on class and updates of the property, along with no losses for the prior seven years.
What do you think distinguishes Burns & Wilcox from other potential partners?
T.C.: Retail agents need to consider the individual and what experience and knowledge they can bring to the table. We are the frontline of Burns & Wilcox. We bring individual talent, experience, and market knowledge to our clients. That is what we sell as our service to our agents. Burns & Wilcox has many property brokers who have been on the wholesale side of the business for decades, and collectively as a group, we have full market access with the experience, market knowledge and expertise to build programs for our retail agents and their insureds.
What best practices or strategies would you recommend for brokers in Habitational Insurance?
T.C.: If you control the business, we suggest that the agent strategize early with the client and the insurance company on the account, set up communication early in the process and set expectations with your insurance carrier and your underwriter.
If the carrier is non-renewing a risk, we suggest that the agent discuss the risk with their direct admitted markets first. Once the agent exhausts their own market access, with no options, then Burns & Wilcox Brokerage would be more than happy to partner with you and your insured for options in the E&S marketplace. We have full marketplace access, including London and Bermuda markets for those mega large schedules.
We are always open and available to set up conference calls with your insured to discuss their current placement and what to expect moving to the E&S marketplace. We can discuss deductible options, terms, and pricing to make them comfortable months in advance, so there are no surprises when formal quotes and terms are presented.
Looking ahead, what do you anticipate for the future of Habitational Insurance?
T.C.: I believe the market for Habitational Insurance will continue to soften at a steady pace, and that rates are going to continue to decline in 2025.
Habitational Insurance
WHY YOUR CLIENTS MIGHT NEED IT: With aging properties, increased climate-related risks, and shifting market conditions, securing comprehensive Habitational Insurance coverage helps building owners and property managers safeguard their investments from unexpected losses.
PROTECTS AGAINST: Covers losses from severe weather events, fires, and other hazards, and can address overlooked expenses such as debris removal and ordinance compliance.
EXPERT OPINION: “At this point, we are in a softening market where we are actually seeing rate reductions, with terms and conditions remaining static. We are seeing a lot of new programs and carriers coming into the fold, and a lot of competition at this point in the Habitational market.”
