Rising Star Fred Zutel of Lockton Gives His Take on Today’s Real Estate Insurance Markets

Lockton's Fred Zutel was named a Power Broker in the real estate category for 2022. Here he gives us his take on the real estate insurance markets.
By: | September 14, 2022


Come see the Stars! As part of our ongoing coverage of the best brokers in the commercial insurance space, Risk & Insurance®, with the sponsorship of Philadelphia Insurance, is expanding its coverage of the Rising Stars — those brokers who represent the next wave of insurance brokering talent.

Look for these expanded profiles on the Risk & Insurance website and in your social media feeds now and continuing into 2023.

In this case, we spoke to Fred Zutel, President, Florida P&C, for Lockton and a 2022 Power Broker in the Real Estate category.

Risk & Insurance: What factors are you seeing that impact the real estate sector?

Fred Zutel: The insurance market for real estate continues to be extremely challenging.

For CAT-exposed property and large scale construction projects, securing enough capacity can be very difficult. Insurers are re-evaluating their books of business and limiting their exposure or demanding significant rate increases in many cases. For large scale developments, a number of key insurers have exited the market, compounding the challenges. This decrease in capacity creates upwards pressure on pricing.

Valuation has also become front of mind for property insurers. Carriers are scrutinizing insured values and mandating increases upon renewal. In many cases they are demanding significant value increases, which further compounds the issue, citing inflation and historical undervaluation as part of their reasoning.

When you add it all up, it creates a very challenging environment in which to procure insurance effectively and affordably. Contrast that with what’s happening in Florida, with the amount of people who are moving down here and the amount of real estate development and projects that are in planning phases.

There are dozens of projects in the pipeline that will grapple with increased construction costs and insurance costs that, in some cases, have quintupled in less than two years. Insurance has become a topic where a business can be at a significant competitive disadvantage if their risk management protocols and strategy is not robust.

R&I: Is it fair to say that the factors you just mentioned are going to be an issue going forward, say for the next six months to a year?

FZ:  I believe so.

There is a fundamental supply and demand imbalance with regard to property and construction liability insurance in the market. The supply of capacity is constrained, and yet there are more assets requiring high limits of insurance.

If you layer in the other issues we discussed, it makes for a challenging environment. Our hope is that the rate of price increases moderates to a sustainable level over the coming year.

R&I: We’re roughly 28 months into pandemic shutdowns. How did you navigate this time period of dramatic change in how we work and communicate? What lessons did you learn?

FZ: We, like everyone else, doubled down and worked to solve problems for our clients. It’s a challenge, because most of the insurance industry was working from home for a period of time, but that’s abated and now organizations are returning to the office.

COVID threatened the very existence of several of our real estate, hospitality and hotel clients. To turn around and advise a facility that was facing a mandated shutdown and suggest that rates were going to increase with no solution wasn’t palatable to clients. You’re adding mounting pressures to an already very difficult situation.

For us, it was about proactively communicating with every client, getting on the phone, visiting them and just staying in front of them with new and different ideas. Challenging assumptions and renegotiating terms was critical; if you just let inertia take its path and do not get creative, it’s a recipe for disaster.

We won the trust of a lot of new clients and validated our work for existing clients by presenting ideas that were outside of the norm. People look to their advisors during times of crisis.

R&I: We hear a lot about Insurtech and technology of analytics and different applications of technology. In your world, how are you using technology?

FZ: It will be exciting to see how Insurtech revolutionizes our industry. While there have been some inroads, there is still a long way to go.

We have seen the proliferation of a number of data and analytic platforms. For example, clients, lenders, brokers and other stakeholders are regularly utilizing modeling data to project their losses and assist with the selection of limits. There has been an enormous change in the mindset, especially on middle market clients that previously didn’t have access to this type of information.

Really, that is just the beginning. I do think much of the underwriting process is still fairly opaque, and I believe that access to better data over time as well as the inevitable integration of other technology solutions and building monitoring systems will hopefully filter into renewal discussions. Technology will allow for more customized contracts that will better suit the needs of clients.

R&I: Are you hopeful that insurance can attract the talent it needs to thrive as an industry going forward?

FZ:  It’s hard to believe that I’ve been doing this for almost 14 years. It’s no secret that a large portion of our workforce is going to be retiring or exiting the industry in the next 10 years.

I feel hopeful the industry will rise to the challenge of attracting talent, because a career in insurance has a lot to offer the next generation of professionals. No two days are the same, and our work is fast-paced, challenging and exciting. The industry is helping tackle some of society’s most relevant and important problems and presents a number of incredible career opportunities.

It’s incumbent upon us all to share our experiences and give back to the industry that so many of us have benefitted from. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected].