Why are so many property brokers in London in the middle of the year?

Lloyd’s of London is the world’s largest marketplace for specialist insurance and reinsurance risk. Brokers can grow their business in a global market, and place risk with Lloyd’s for a number of reasons.  For decades, Lloyd’s has been the predominant insurer of large multifamily schedules. The capacity offered has ebbed and flowed in alignment with the hard and soft markets over the past 20 years.  

The hardening property markets of the past were caused by numerous factors, including a lack of capital, increased reinsurance costs, significant catastrophes, or even changes in catastrophe modeling. But none of these factors point to the causation of the current hardening market.

The current hardening market is due to basic underwriting profitability – or lack thereof. Monetary policy will continue to tighten, causing economic growth to cool.

The impact of lowering interest rates further pressures underwriters to perform.  

From Q4 2009, through Q4 2017, carriers systematically and consistently decreased rates, lowered client retentions, and loosened terms and conditions.  Thirty-three quarters of compounding rate reduction means underwriters can no longer hide the obvious; they were losing money. 

Change is rapid with all the hardening markets. But we believe with the increased reliance on modeling, the sophistication of modern underwriters, and the limiting number of underwriting firms, that this is the new normal.  

So its time to focus on how to overcome this problem.

Here are some tips to mitigate the impact:

• Get your renewal out early, and bind coverage if you get the offer.
• Talk to the C-suite and risk managers of your organization – communication is key.
• Meet with your underwriters. Insurance is still a relationship business – there is no google auction place for managing risk. 
• Work with your trusted advisors, and brokers focused on the multifamily space.  

CFOs and partners need to search for areas to increase revenue. Effective Coverage has a 10-year partnership with some of the nation’s biggest owners and operators in the country, and we have seen an uptick in large owner-operators looking beyond renters insurance to a 100% lease compliance software and human solution.

Effective Coverage has a way to fund your rate increase.

Want to learn more about maximizing profits for resident risk management? Download our white paper, “Resident Risk Management is Changing, From Burden to Benefit.”