As weather volatility impacts coverage across the US, REInsurePro is here to stay

As weather volatility impacts coverage across the US, REInsurePro is here to stay | Insurance Business America

Spreading risk amongst carrier partners central strategy for insuring catastrophe-hit markets


Mallory Hendry

This article was created in partnership with REInsurePro.

REInsurePro’s Jason Jones (pictured) has been in insurance for over 20 years, evolving along with the industry throughout that time. In his current role he’s observing a significant trend, the full impact of which is yet to be seen: property insurers pulling out of catastrophe-hit markets.

“I review weather reports and take a closer look at what’s actually affecting different parts of the country,” Jones said, adding that his position of SVP – risk management, was developed over the last year, to some extent, in response to Mother Nature’s volatility.

“Natural disasters and significant weather events are no longer exclusive to specific parts of the US — this is happening all over,” he noted. “My earlier roles prepared me to understand how our company feeds off these changes and allow me some measure of clarity as to what makes sense to allow our business to thrive and be effective. No matter what other insurers are doing, REInsurePro is here to stay.”

Volatility impacting coverage across US

Wildfires have been identified in nearly every state over the past few years, expanding to cause challenges in areas like Texas, Oklahoma, Arizona, and Florida. Hurricanes have been strong enough to extend further into the mainland, causing damage in regions past the coasts. In the recent past, remnants of Tropical Storm Hilary caused heavy rains, flooding, and high winds in California, and there was an earthquake in New Jersey.

Between the rising costs to rebuild damaged structures and the forecasted increasing frequency of these events, it’s difficult for insurance companies to keep up with the rising expense. Many of the withdrawing insurers looked at actuary data showing the cost-effectiveness of continuing to provide coverage in those areas was not favorable and recommended pulling out before other parts of their book of business were impacted.

“As of right now it appears the market is at a point where they understand what’s coming — and that’s why we’re seeing some of these companies withdraw,” Jones said. “They recognize they won’t be financially stable if they continue to insure in these areas.”

How can brokers help?

This creates a difficult situation for the insureds, who face premiums 200-300 times more expensive when dealing with insurers that remain. Brokers play a critical role in helping these clients determine the most effective version of the minimum necessary insurance, with no bells and whistles, while balancing it against what the insured can tolerate in the event of a loss. Understanding how different coverage reacts in certain situations is imperative — for instance, hurricanes come with a storm surge and once the water touches the ground, flood coverage is needed to address the related damage — and brokers can also arm clients with information on rates in different areas, providing a more comprehensive picture if they’re debating buying an investment property in Florida, for example. When brokers have a thorough understanding of their client’s business model and budget, it’s a win-win: the broker recommends appropriate products and clients maintain — and hopefully grow — their business in certain areas.

“Coverage is what you make it, and insureds have to pick and choose the best fit,” he said. “As a broker, the job is primarily to make clients aware of what’s available, what they can live without, what’s sustainable for them when it comes to deductible and coverage amount, and what the lender requirements are. Then help them piece together what makes the most sense.”

Catering to client needs

From optional add-ons to offering a la carte options that fit within the client’s bottom-line budget, REInsurePro is working with existing carrier partners to provide catered products that allow insureds to build tailor-made coverage. Always working towards securing alliances with others that understand the landscape, REInsurePro is also adding more partners so that when a severe weather event occurs, one carrier doesn’t take the brunt of that storm — a factor for many of the insurers who have pulled out of certain areas.

“In our model, we aim to spread the risk,” Jones explained, adding that this structure allows continuity of insurers in these higher-risk locations. “It really is a daily function for us to review risks and determine what carrier appetites are. Is there a partner willing to take on additional coastal insurance or cover an area of California where wildfires are more prevalent?”

The continuous evaluation of any situation, whether it be a weather event or the climate in the market overall, is part of Jones’ daily job and critical in REInsurePro’s commitment to cater products to what clients need. Looking at forecasts in real-time affords him the opportunity to add value to clients, from initial coverage discussions to claim explanations, and again Jones underscores the fact that REInsurePro is here to stay.

“We’re always looking for a way to allow for better, greater, and different opportunities for coverage,” he said. “That’s the overarching goal that really drives me right now.”

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