The property insurance market continues to harden

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Both the residential and commercial property insurance markets have steadily hardened in recent years, resulting in rate increases every quarter for the last few years, along with an increasingly restrictive risk appetite and more stringent terms from insurers. Unfortunately, this trend is continuing.

Policyholders with poor loss control practices; who’s property is used for higher risk commercial activities; with property located in flood-prone areas, or with construction including flammable cladding may face high premium increases in excess of 50 per cent or even struggle to find cover at all.


What are the drivers of a “hard” property insurance market?

Property insurance premiums rates have historically been too low

Property insurance has been under-priced for years. This has resulted in many insurers’ Combined Operating Ratios (a ratio of claims, commissions, and insurers’ expenses to premium income) exceeding 100% - so the cost of providing property cover has been higher for insurers than the premium received.

This situation has been exacerbated in terms of insurer profitability as global interest rates have remained at rock bottom, minimising the investment income insurers obtain from the capital they hold.

Inflation in the costs of building materials

A number of factors including a weak pound and lack of skilled tradesman linked to Brexit and the pandemic has resulted in increased construction and repair costs, with these costs having an impact on claims. Significant delays in delivery times for building materials, have further increase building costs and extend required indemnity periods for Business Interruption insurance.

Natural disasters and large losses

Large loss activity has been driven by more frequent and severe weather events over the last few years and this more volatile pattern looks set to continue.

With historically low property rates and reserve releases from prior years depleted, insurers are now taking the opportunity to increase rates and build a “large loss fund” to provision against future large and event losses.

Storms, floods, and other natural disasters can wreak havoc on businesses and property, and the impact on the insurance market and therefore premiums, can be significant.

COVID-19 and property cover

During the various periods of lock-down, non-essential businesses may have been left unattended leading to an increase in escape of water losses and vandalism which may have gone undetected for extended periods of time. Whilst this will be a contributory factor to rising rates in the commercial property market it is worth noting that claims frequency for home insurance is down during the pandemic as people have been at home more often meaning certain losses don’t occur or are detected earlier.

Modern methods of construction

Modern planning requirements and the development of fire detection and prevention systems have had a positive impact on fire losses in terms of frequency and severity meaning catastrophic fire losses are less of a feature now than they were historically. However, modern methods of construction such as timber frame and use of cladding have led to some unexpected loss activity and this will impact insurers’ appetite and the premium and terms, they are willing to offer.


How to minimise the impact of the hard market on your insurance terms and premium

Start your renewal process early

Work with your insurance broker to start your renewal process well in advance of your renewal date. Being thorough and timely is vital to ensuring that your risk presentation is fully understood and evaluated adequately by underwriters.

Be prepared to provide extensive information about your property

Be prepared to provide extensive information about your property, for example structure details, alarm specifications and evidence of fixed wiring and electrical installation inspections. Businesses who are able to provide this additional detail give underwriters the opportunity to moderate premium increases.

Ensure that your property sums insured are accurate

Under insurance has been widely recognised as a major challenge across the insurance industry. Based on the experience of rebuild valuations specialist Rebuild Cost Assessment Ltd, almost 80% of buildings (commercial and residential) do not have the correct building sum insured.

Underinsurance represents a real risk is to property owners. Significant underinsurance could result in “Average” being applied to a claim with a proportionate reduction in the claim payment. A recent professional valuation will give insurers confidence in the quality of the underwriting information they are using, and that they are charging the right premium for the risk they are covering. We can help point clients in the right direction to get a professional valuation.

Implementing risk recommendations is key

Ensure insurer survey recommendations are completed, and work with your broker to present the loss control measures you have in place. Taking the appropriate steps to reduce your risks whenever possible is likely to make your business more attractive to underwriters.


For advice or a confidential review of your insurance portfolio, please contact

Joe Clarke

Commercial Broker, Green Insurance Group

Mob: 07918 889072