SUPPLY AND DEMAND, LOSSES DRIVE RISE IN INSURANCE Managing risk and investing in proactive safety measures are ways to secure better rates. By Hamlet Vazquez, MCAM-HR
Over the course of the past year, insurance premiums have skyrocketed. For many homeowner associations it’s also become harder to acquire insurance coverage either because of previous claims history or their geographic location in an area considered to be of high risk for catastrophic losses. To understand the growing challenges of insurance coverage and rising premiums, I spoke with Jonathan Naranjo, Senior Vice President and Regional Real Estate Practice Leader of HUB International.
40
Vision Winter 2021 | cacm.org
As a number of associations were finalizing their budgets for 2022, they noticed quite the uptick in their insurance premiums. What is driving these increases in insurance premiums? There are a myriad of factors driving rates and premiums up for all insureds regardless of industry. The market continues to be hard, and habitational real estate has been one of the hardest hit industries due to the frequency of losses (e.g. water damage) and insurers pulling out of the market, creating a supply and demand issue. Catastrophic (CAT) losses continue to cost insurers multi-billions of dollars each year, impacting rates. For example, 2020 was the costliest wildfire season for California (well over $20 billion) and the fifth consecutive year of multi-billion insurable losses due to the fires. In addition, hurricanes and floods continue to impact the Midwest and East coast. Hurricane Ida, for example, is now projected to cost insurers between $25 billion to $35 billion in losses. Although CAT factors do not directly impact HOAs, insurance companies are well diversified. When they pay billions in losses each year, their entire portfolio is scrutinized, and they increase rates to help mitigate the financial hemorrhaging or pull out of the market.
