The Shifting Terrain of Property Risk

The property insurance landscape has been undergoing a dramatic transformation in the last five years, with catastrophic events occurring with greater frequency and in unexpected locations. This evolution is forcing insurance professionals to reconsider traditional approaches to risk assessment and coverage.

“The nature of property risk has been evolving over the past several years, with an increasing severity and frequency of catastrophe losses. This shift has altered how the marketplace perceives and approaches property insurance,” said Tonya Courtney, senior vice president of Nationwide E&S Brokerage Property.

Recent events highlight this changing dynamic. Hurricane Helene caused severe flooding in Asheville, North Carolina—an area situated more than 250 miles to the coast where such extensive damage would typically not be anticipated in the wake of a windstorm.

“When underwriting hurricane losses, the focus is usually within a 50-mile radius of the coast, where the greatest impact from a named windstorm event is expected. However, Hurricane Helene defied these expectations, causing widespread damage in Asheville and catching everyone by surprise,” Courtney explained.

This pattern of unexpected catastrophes extends beyond hurricanes. What the industry describes as “secondary perils” are now driving significant losses.

“While the E&S market has traditionally focused on named windstorm as the primary peril, convective storms were the primary driver of property losses in 2023,” Courtney noted. “We must also consider the impact of other perils, such as wildfire, which wasn’t a significant issue before the Tubbs Fire in 2017 caused over 5 billion dollars in property losses.

The financial impact of these events is staggering. According to Courtney, catastrophic events have exceeded $100 billion in insured property damage worldwide since 2017 and are expected to worsen.

Evolving Underwriting Practices and Market Shifts

Tonya Courtney, senior vice president of Nationwide E&S Brokerage Property

As risks evolve, so too must underwriting approaches. The Excess and Surplus (E&S) market is seeing increased business flow as standard markets have struggled with the changing risk landscape. The shift gained momentum around 2018 when the standard lines property market hardened considerably as a result of losses from Harvey, Irma, Maria, and California wildfires.

The increasing frequency and severity of losses and increasing valuation of buildings make it difficult for a single carrier to handle such large exposures. “Post-COVID, building materials and labor costs have exploded, further exacerbating the situation. “For example, a hospital valued at $2 billion may be covered with a $750 million loss limit from the standard market, which is a significant exposure for one carrier,” Courtney explained.

The E&S market offers a solution by spreading risk across multiple carriers. “The E&S market can spread the risk by taking smaller portions of the exposure. A $5 million loss is more manageable for a single carrier than a $750 million loss,” Courtney said.

This shift has prompted E&S underwriters to adapt their risk assessment practices. “E&S carriers are becoming more diligent in utilizing data analytics to evaluate and underwrite property exposures. They are not simply offering high limits on every risks without an in-depth and thorough understanding of the risk and potential for loss, “Courtney explained. “Valuation is a key focus, and underwriters are relying on sound valuation tools in lieu of stated values on property applications as accurate valuation is crucial for setting PMLs, determining attachment points, limits, and deductibles. Roof scores have also become an important underwriting requirement, especially for coastal risks.

“Wind loss prevention relies heavily on the roof as a first line of defense,” Courtney noted.

The Critical Role of Relationships and Prevention

In this volatile environment, strong relationships between brokers, carriers, and clients have never been more important. Trust and consistency are the foundation of successful partnerships in the insurance industry.

“In the current landscape, fostering strong partnerships is absolutely essential. Carriers must go beyond pricing risk and position themselves as strategic partners in risk mitigation and portfolio resilience.

For brokers navigating this complex market, Courtney recommends working with carriers that are transparent, collaborate on loss prevention, and have dedicated underwriters that are known in the industry as trusted advisors.

“It’s crucial to work with underwriters who have the expertise and knowledge to provide consistent, strong programs year after year,” she advised. “Anyone can put a policy on the books, but the real value lies in the underwriter’s ability to deliver reliable coverage without sudden changes or surprises.”

This consistency builds trust, which becomes particularly valuable during market fluctuations. ” Courtney said.

This collaborative approach to prevention not only protects policyholders but also contributes to the long-term stability of insurance companies. By working together to identify and address potential hazards before incidents occur, the industry can better navigate the increasingly complex risk landscape.

“To address this, we must evolve our thinking and approach to align with the changing market and global conditions,” Courtney concluded. “Collaboration and innovation within the industry are crucial to tackling these challenges effectively.”

To learn more, visit nationwide.com/experience.

About Nationwide

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Nationwide. The editorial staff of Risk & Insurance had no role in its preparation.