HARD MARKET
LOW INTEREST RATES
Historically low interest rates contributed to an increase in home purchases and home renovation projects . With more people working from home over the past two years , a higher-than-average number of people started investing in home improvement projects . This resulted in an increased demand for building materials .
LABOR SHORTAGES
Current labor shortages throughout the supply chain are making it difficult to keep up with demand . Fewer workers in the mills means the timber isn ’ t being cut and processed as quickly . Fewer truck drivers makes it more difficult to transport the lumber .
GAS PRICES
Increased gas prices make it more costly to transport materials , thus increasing the final cost of those materials .
IMPORTS
The American market receives more than a quarter of its lumber from Canadian lumber mills . Severe storms in late 2021 and early 2022 have caused flooding in Canada , which is disrupting the supply chain . Canada is also struggling with a beetle infestation , which is killing some softwood trees , making them unusable for construction .
In addition , on November 24 , 2021 , the United States more than doubled the tariffs on Canadian softwood imports , bringing them up to 17.99 %, making it more costly to import lumber from our northern neighbor .
INCREASED CATASTROPHIC LOSSES
The demand for building materials and labor has also increased due to the increased number and severity of catastrophic events over the years . According to the Insurance Information Institute , there were 97 natural catastrophic events in the United States in 2021 , with an estimated $ 92,000,000,000 in insured losses . This is an increase of 9 % compared to the 2020 losses and more than double the 2019 losses .
A fatality of the hardening market is the concept of “ grandfathering ” certain risks that were not an underwriting concern when the carrier first wrote an account . Some carriers are starting to crack down on things that weren ’ t an issue when they first wrote the account but now would disqualify the account from receiving a new business quote in their program .
When the market begins to harden , it is critically important to have a strong insurance broker on your side . They will be able to help you to assess appropriate coverage levels for your business , review claims history , identify optimal carrier partnerships , and implement risk management and training programs .
Here are some of the general services we offer to help our insureds stay educated and prepared :
• Loss run and claim review : to determine trends that can be corrected
• On-site inspection : to determine risk management suggestions that could help protect the Insured from preventable losses
• Property value determination : to plan for an increase in a building ’ s replacement costs at renewal
• Hazard analysis : to identify what types of hazards the community is exposed to
• Pre-renewal strategy meeting : to discuss changes the Insured may want to make to their policy at the next renewal
• Governing document review : to determine if any recommendations can be made to help protect the association ’ s future insurability . Common examples of recommended amendments are :
• Limiting the number of units that can be tenant occupied
• Implementing Tort Immunity ( New Jersey only ) to protect against unit owners suing in the absence of gross negligence
• Passing a Deductible Resolution to clarify who is responsible for the association ’ s property deductible in the event of a claim
BY : COLLEEN HARLESS , CISR , ACSR , CIC , SENIOR ACCOUNT MANAGER , JGS INSURANCE , A BALDWIN RISK PARTNER
• Requiring burst-resistant washing machine hoses
• Requiring regular dryer vent and chimney inspections
• Requiring regular water heater inspections
• Vendor contract review : to make sure the appropriate risk transfer is in place in the contracts ; to pull the vendor ’ s insurance carrier into any claims arising from the vendor ’ s work or lack thereof
• Policy coverage review : to identify where additional coverages may be needed to fill in gaps ( like earthquake , flood , or cyber liability )
The most important thing to remember is to stay informed so you will be prepared to budget accordingly . +
1 . The Council of Insurance Agents & Brokers ( CIAB ) is a global organization that represents 200 of the top commercial insurance agencies and employee benefit brokerage firms . All insights are from the CIAB Q1 2022 P / C Market Report .
Colleen Harless is a Senior Account Manager at JGS Insurance and has been in the insurance industry since 2001 , specializing in community associations since 2005 . Working closely with insurance underwriters and customers , she provides fullservice property and casualty insurance to community association clients . She has Accredited Customer Service Representative ( ACSR ), Certified Insurance Service Representative ( CISR ), and Certified Insurance Counselor ( CIC ) designations and helps create training and informational materials for company use .
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