How Hurricane Sandy May Still Affect Your Business

Twenty-five billion dollars.

Since last fall, the impact of Hurricane Sandy has totaled anywhere between $20 billion and $25 billion in terms of insured auto, home and business insurance claims payments.

A closer look at the numbers reveals Sandy’s devastation impacted a region that features one of the highest concentrations of wealth in the world. According to Vincent J. Dowling, managing partner at Dowling & Partners, Sandy “highlights the whole issue that the industry is trying to deal with, which is ‘what is the new normal?’ as far as level of catastrophes.”

As part of this “new normal,” the hard-to-place property segment – especially coastal property – just became a bit more challenging. To help make sense of a category in transition, here is an insider’s take on the hard-to-place property market from two top industry executives: John Moran, CPCU, President of North Light Specialty Insurance Co., and Vice President of Allstate Gary Tiepelman, Senior Vice President of Underwriting at Scottsdale Insurance Co.

Q. Do you see new, developing trends or exposures in the marketplace?

Moran: Each market differs, even when facing similar exposures. Coastal property has typically been a mainstay of difficult-to-place risks. But now we are even seeing a big increase in business coming from inland areas. They can range anywhere from properties exposed to tornado and hail events to wild fires, severe winter storms and freeze events.

Tiepelman: The marketplace appears to be very similar to what it has been for the last several years, with one exception: There seems to be more optimism about the market, with more of our traditional E&S business finding its way back to us and, with that, more responsible pricing or risk.

Q. What exposures do you see as the most challenging for agents today?

Moran: From my perspective, coastal property continues to be the leader…it’s hard for them to find stable, financially strong companies that can write this business. Capital requirements, reinsurance, hurricane models and other influences continue to change how the business is viewed and the returns necessary to take on these risks.

Tiepelman: Keeping up with demand and knowledge of niche products is tough on agents in order to avoid E&O complaints.

Q. How do you see the insurance marketplace responding to these needs?

Moran: Some markets are healthy and have a lot of capacity. Other markets continue to need more capacity and solutions. We continue to discuss with agents the importance of dealing with financially strong partners that want to be in their marketplace for the long term.

Tiepelman: The industry can respond through educational classes and simplification of policy language in order to avoid legal ambiguity.

Q. What benefits do wholesalers bring in writing these hard-to-place risks?

Moran: New product ideas and enhancements to existing coverage are developed out of the carrier/wholesaler relationship. Oftentimes, retail agents don’t have direct appointments with the carriers that focus on higher-risk properties and they need a strong partner to assist them in placing this business. Insurance carriers also benefit from working with the wholesaler because of their knowledge of the local marketplace and their underwriting experience.

Tiepelman: Wholesalers bring the risks needing placement together with the appropriate markets. Their knowledge includes the risk, the environment in which that risk exists, the markets and the competitive state of the marketplace. The wholesalers perform the appropriate match of all these variables.