“No return to a soft market” for real estate risks, Willis cautions

In a new report on the real estate insurance market, global broker Willis says despite price relief in the property line, other coverages and a continued hard line on terms and conditions are still causing headaches for the industry.
Speaking of the U.S. market specifically, Willis notes that even in the property line, where rates for clean risks have dropped off by as much as 20%, underwriters are maintaining a firm stance. Exclusions such as mold are the new normal. “In this respect, no return to a soft market is coming any time soon,” the Willis commentary notes.
And while the general liability line has seen rates fall up by up to 10%, other liability lines remain troublesome. Notably, directors’ and officers’ (D&O) and workers’ compensation coverages remain steep. “Savings in these areas are not forthcoming,” Willis notes.
“While the message for the moment is still positive, the improving market is quite precarious,” the report says. “A catastrophic loss an earthquake, hurricane, terrorist incident could have immediate and dramatic consequences.”
Another issue will be whether or not the Terrorism Risk Insurance Act (TRIA) is extended by the U.S. government past its 2005 sunset. Willis notes that TRIA is unlikely to be extended, and the result could be property capacity drought in major U.S. cities.
The study suggests real estate risk managers look at long-term solutions, even citing the example of captives, to weather the instability of the marketplace. “Good deals may be easier to come by these days, but stability may be the more prudent goal.”