Placing You First Insurance Podcast by CRC Group
The Placing You First Podcast spans a diverse spectrum of insurance industry issues to keep you and your clients informed.
Placing You First Insurance Podcast by CRC Group
Dwelling Dilemmas: Navigating Habitational Property Marketplace Challenges
In this episode we attempt to unravel the complexities of Habitational property insurance with Daniel Ball, a Property Broker with CRC's Boca Raton, FL office and David Pagomian, President of CRC's Red Bank, NJ office. Join us as we traverse the labyrinth of skyrocketing property valuations and the resultant seismic shifts in coverage layers. The stakes have never been higher in 2023, with ITV rates soaring, and our guided discussion highlights the urgent need for carriers to preserve their ratings, which in turn dictates their risk appetite and participation.
We delve into the mission-critical role that CRC's team plays. Harnessing the power of data modeling and analytics, Daniel and David illuminate how finely-tuned loss limits not only satisfy lender demands but also keep premiums within the realm of possibility for property owners. Our conversation serves as a testament to the precision and innovation that defines CRC's approach, laying out a blueprint for retail agents and their clients to gain leverage in a market where only the resilient and inventive can truly thrive.
Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.
Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!
Hello everyone. Today, amanda and I are joined by Daniel Ball, a property broker with our Boca Raton, florida office, and David Pagomian, president of CRC's Red Bank, new Jersey office.
Amanda Knight:This is the Placing you First podcast from CRC Group.
Scott Gordon:This podcast features news and insights from a vast knowledge base of over 5,100 associates who write more than 35 billion in premium annually.
Amanda Knight:Plus, we give you the latest information on what's happening at CRC. This is the Placing you First podcast.
David Pagoumian:And now the hosts of the podcast Amanda Knight and Scott Gordon.
Scott Gordon:Yeah, thanks for joining us guys.
David Pagoumian:Thanks for having us on, thanks for having us Happy to be here and share some of our knowledge.
Amanda Knight:We all know that property has been tough in 2023 overall and when you bring Habitational into it, talk to us about what the market has looked like this year. Maybe give us one word or phrase that sums up Habitational property right now. Maybe, choose something other than dumpster fire. But just let us know what phrase would you use to describe Habitational?
Daniel Ball:Tumultuous yeah, good words. Tumultuous, that's a good one. I would say. Challenging or stressful, those seem to be two of our buzzwords around the office.
Amanda Knight:Maybe all three together. Yeah, challenging, stressful, tumultuous.
Scott Gordon:Well, one phrase we've been hearing over and over in relationship to property is insurance to value. Can we talk a little bit about that? Go ahead, Dan.
David Pagoumian:Do you want to start? Go ahead, yeah, yeah, I'll start off.
Daniel Ball:It's definitely been another one of those buzzwords. It's been the talk of every insurance carrier that we have dealt with in 2023. And it's been a challenge. I think the stair step approach kind of got tossed out the window because the valuations were so low in the past couple of years. So we're seeing a huge jump in not a 5% 10% increase in ITV on most of the accounts that I'm seeing. We're seeing 50% to 60% bump in values.
Daniel Ball:So you could be going from 90 a foot to what most carriers minimums now are $125 a foot, which is it's a huge jump in TIB and when you have a huge jump in TIB it really changes the account as a whole. That could bring a $10 million account where you had one carrier giving you the full $10 million to now a $17 million account. That requires this to now be layered, because that carrier we did $10 million last year not only can't do the full $10 million, now they can only do $5 million and now I have to layer 12 million on top of it, just adding to the cost yet to add, to add to what Dan's saying, a lot of our senior partners at these insurance companies are Reminding us that they have a company rating right.
David Pagoumian:So a minus a 10. We have, you know, a financial committee that allows us to work with these companies, and in order for them to keep those ratings, they have to go through Stress testing from the rating agencies, and what that looks like is they'll run a portfolio Analysis and they'll hit that account. That portfolio and an account is an insurance company. So pick your insurance company ABC. They all have their own portfolios and they all have to withstand a Named storm and a calc quake in any given year, and those are just two Realistic disaster scenarios. There could be convective storms in that as well. So if these insurance companies are not able to maintain their rating, they can't play, they can't participate, and the only way to do to do a you know, a portfolio analysis Accurately is if you have good data, you need the right data, and if you don't have the right values, then your portfolio is not going to be as accurate as it would be. And so add to that modern day changes in construction costs and Post-covid rippling effects that we're seeing everywhere in every industry, these insurance companies have to maintain their rating, and so they're participating on Habitational risks now in small lines. And so you know, springboarding off of what Dan said, those small lines have to all be brought together.
David Pagoumian:A lot of them have minimum premium requirements, they all have scheduled limited liability limitations and, of course, we all know that the Habitational business has always been an industry for insurance where there's been, you know, sort of gamesmanship in the, in the values. Now, not suggesting gamesmanship in the way of this being deceitful, what I'm talking about is my, my uncle's a contractor and you know they could help us build. Everyone's got their story, you know, and in that story you know we saw evaluations coming down to $80 a square feet, 90 dollars a square feet, and so those have you know to what Dan was saying have definitely sprung board. You know, minimum ITV if you're not at 125, no one's really gonna look at you, and and if you're, if you're not doing this, the underwriters are just gonna do it behind the scenes, they're gonna true it up in their systems and they're gonna charge you for it.
Daniel Ball:Yeah, and trying to try to line up to you know what every like Dave was saying. Every carrier kind of has their own Portfolio and and their own requirements. So trying to line up everybody's specific ITV requirement Carrier A could have 125, carrier B could have 135, 145 and when you're layering a deal that doesn't work, you need to have all the carriers agree to a specific valuation and, honestly, you end up going with the carrier who requires the highest ITV if their pricing makes the most sense and everyone follows that. Just adding to the cost.
David Pagoumian:So we've been advising our retail partners on anything habitational get it in early, because there needs to be data scrubbing something. Our organization is, in my opinion, at the frontier of using data as a wholesaler. This is sort of a newfound concept and not newfound, but it's still new. We're still in our infancies of what I know our organization is aiming to do, and so having that vision of where we're going with data gives our teams the ability to be able to advise our clients about this and help them take some of the anxiety out of these placements.
David Pagoumian:Listen, you have also a class of business that has always been very shoppy every year. A lot of habitational risks. Listen, they're all good. I don't want to suggest good, but they're all ones that want to develop a relationship. And then there's all this no, we're just going to find the cheapest quote. Those we're going to find the cheapest quote, those are the ones that are definitely getting an education and I think they're turning into those. Hey, maybe we should start building more relationships with the insurance industry on a troubled class of business.
Amanda Knight:Are you seeing anything else that's sort of catching some attention as far as deductibles or types of construction that carriers are trying to avoid, anything that we want to kind of put an alert out there about?
Daniel Ball:Yes to all those. I mean we could talk at length and I feel like we do talk at length with our retailers. But to David's point, the key is getting it to us early so that we can start developing a plan and start speaking to these carriers, getting the ITVs correct, getting a renewal plan in place as early as possible so that when we're delivering bad news, or at least delivering bad news early so that people are prepared and no one feels this is coming out of nowhere. But to Amanda, to your question, yes, we're seeing deductible increases, we're seeing line sizes being cut drastically and the biggest pain point that I have faced being down here in South Florida and seeing a lot of frame and jam, and specifically older frame and jam, is just the lack of carrier participation on that class of business. I think I had mentioned it in the article where I once, when I first started 10 years ago, we used to have 15, 20 carriers quoting these deals five, 10 million limit at a time, and it was a lot easier to layer. If you were even layering, it was a lot easier to place these deals.
Daniel Ball:Now I'm stuck with a handful of carriers, all of which have strict restrictions on how much limit that they can deploy and we're seeing deductibles vastly change from what was once the norm, right. So a big thing that people overlook is the change from a per building to a per location deductible. I mean, we do a lot of garden style apartments down here in Florida. That is a huge change in your exposure you are looking at let's just use an example of round numbers $10 million apartment location where you have $10 million building. That 5% deductible, which was per building, was $50,000. Now that 5% deductible on a per location is half a million dollars. So you're, as an insured, taking a lot more risk and I don't know that that's necessarily sinking in with the insureds and not that there's really another option. Right, there's not really someone else out there trying to go back to the per buildings, so they're kind of stuck. They're kind of stuck with that. But that's the biggest pain point I feel that we have is just the lack of capacity on certain classes of business.
David Pagoumian:Yeah, I mean, look older construction you're having a challenge with. We're getting a lot of insureds through our retailers. Hey, we're getting ready to buy this portfolio. Can you give us a range on the premiums? Right, and you're seeing some 60s with not much update. You know these are going potential aluminum wiring exposure. These are going well into you know. I mean some of the most aggressive. You know maybe 70 cents, but they're going above a dollar rate and now it becomes, you know, how much limit are we looking to buy?
David Pagoumian:You know a lot of companies are making sacrifices on limits, you know, and they're working with their lending institutions. Their lending institutions are being educated on what's going on in the market. But I know that you know our collective teams does a great job doing due diligence and so you really have the thing that's changed. Is you really? You know, and this is where it falls on our shoulders you got to go everywhere because everyone is changing their appetite on on hab daily. You know there was a few that you know weren't willing to entertain aluminum a couple of months ago. Now they're willing to entertain.
David Pagoumian:You know this would be with the remediation in place and the proper endorsements. If you don't have it. You don't have coverage. You know establishing for our side of the street it's establishing a lead market. There are still accounts where you know you're getting some of these strong MGA's that we know that can still do 100% of the primary limit, and then you know that makes it a lot more easier, that's more efficient.
David Pagoumian:But most of the stuff is starts out with a lead player and then you know, you know you're not getting anywhere unless you share that lead quote with the panel and then you start to see the program reveal itself. It's getting somewhat more stabilized. To say it differently, you know, I think that you know we're, like you know, in my opinion, a five year hard market. It's not a hard market, no more, it's just the market. Right, this is the market we're in and if you want to play in it, you know there's this new cadence that you really have to embrace and you know Habitational is just one of those sectors that is feeling the pain. There's many others as well.
Daniel Ball:I think 2023 was a good, you know year where you just cross your fingers and hope you got a renewal quote from your incumbent carrier right, if you can get your renewal terms. And you know it was a 35% increase in rate, but they still gave you the same amount of capacity. That was a huge win. You know, even if they cut back from a 50 million primary down to a 10 million primary, I mean that was still a big win, because the amount of carriers out there offering more than a two and a half or a five million dollar line is very minimal. I think there's maybe two or three.
Daniel Ball:So you were just really hoping you got your renewal quote. But what we were obviously seeing to kind of put the two together, the ITV and the renewal terms was compounding. Right, you saw a 45, 50% increase in ITV and then, off of that ITV, you saw a 45, 50% increase in rate. And the insurers are looking at one number, they're looking at the premium and they're seeing how that compares to what they were paying last year. And in most cases, in some cases, you were seeing Triple digit increases, especially in have and especially in South Florida when it was, when it was lesser construction, you know jam or frame.
David Pagoumian:South Florida is its own market with have because of the cat.
David Pagoumian:Yeah you know that that's its own beast, not non cat have. Yeah, you know is is a little different, little different genre. Again, you have to really grind the way on each of these deals to demonstrate due diligence, because the pricing that you are Going to give the client or the pricing that the market is going to give you know a lot of this stuff. It makes our job very challenging because you know we're powerless and that's tough for us as brokers because we want to please our insurers or retail brokers. And you know, and it, you know it, you know it is what it is, it's not gonna fly. You know you have to demonstrate that. You rolled up your sleeves and there's no hope here. You got it. We got to get the deal right. We got to get the quote. Mm-hmm. I Think we need to write a piece on the anxiety of placing to have a program.
Scott Gordon:Yeah Right, it's its own thing, yeah. Well and and okay, david, you mentioned South Florida is its own world. And, daniel, you're you're down in South Florida. Yeah, david, you're up, you're up there, yeah you're up there. So let's talk about and we know you guys handle stuff from all across the country, but in terms of your own particular geographic locations, have you guys noticed any unique issues cropping up in the hab property market that we needed to talk about?
David Pagoumian:Yeah, I mean, you got wildfire, convective storm, you've got cat wind, whether it's from Virginia all the way up and around to Texas, and you know, and then you have fire. It's so, it's shaken and stirred in every peril, mm-hmm, and, and that you know. Add to it the proper ITVs for proper modeling, and then from that are capacity providers that want to play, you know, and so each of those is different. You know, there's some markets that will write the wildfire, some markets that won't, and so if you have a program that's got some wildfire in it, you bifurcated, you separate it, you place it separately, you treat that cancer differently.
Daniel Ball:Yeah, you know, down here, down here in South Florida, I know I know it was a few years ago, but I mean surf side is still fresh on on some of these carriers minds. And for those who don't know, surf side was the Condominium that collapsed down in Miami Beach. I mean, obviously, florida, being in South Florida, everyone thinks of the wind and that's what's been that the hard right for For a lot of years and still is. But that aop, the X wind portion of these deals used to be nothing, used to be five, ten cents ground up. Get as much limit as you want. If it's a fire-resistant, I don't care how old it is, well, we'll do the whole thing for ten cents, five cent. And now that that has changed, that is drastically changed. So you're, the wind is a challenge that I want to, you know, emphasize that, that it remains to be a challenge. But the X wind is no walk in the park either, especially when you have a lot of these older high rises, right, I mean, you saw what happened, that that collapses and it these carriers don't forget about that. So that that's definitely changed, at least the X wind side of it. And and the wind still remains challenging. So you compile the two together and it's become, you know, a perfect storm.
Daniel Ball:No pun intended, but you know one thing CRC has has really helped and David kind of touched on it first earlier was Was getting lenders to kind of approve loss limits, because eventually you run out of capacity or capacity becomes too expensive that it's not affordable for these insured. So CRC has done a very good job with the modeling team in modeling air and RMS in order to justify what limit an insured should buy and that's not, you know, a guarantee of if a storm hits this, this is what it's gonna cause. But it's a really good tool that we're able to use and share to our clients, the retailers and them to share to the lenders and the Insured to get some of these loss limits approved. We're not we're not picking these limits out of thin air. We're using data, we're running models and we're using what the underwriters use to price out a deal to also advise on what limit makes sense for an individual insured.
Amanda Knight:You know, knowing that the market can be really daunting right now, or tumultuous, or stressful, or challenging whatever word we want to we want to use how does working with the right wholesale broker, preferably team CRC, make a difference? We talked a little bit earlier, you know, about the data and analytics we have through our ready platform, but we're also more than than our platform. We love it. It's growing, it's expanding and becoming something that we really hang our hat on. But are there any other differences that team CRC makes for our retail agents and their clients?
David Pagoumian:I really do think. You know I'm a big believer in executing the basics. Well, you know, for me to have a platform where I could take a spreadsheet, throw it through and it calculates a lot of risk calculation that I could share quickly to make quick decisions with clients and underwriters and colleagues on what their thoughts are on the markets, and then to also ask the machine hey, which markets do you like for this class of business? You know I'm already at the 50 yard line, right, and it's we still got. You know a whole much you know. So it takes us very quickly to areas of qualifying, of getting ready for pre renewal meetings, of being able to have really deep, meaningful dialogue on on data and what it means to that specific risk.
David Pagoumian:And I think when you hold somebody's hand that way, you're showing them something that that truly or I don't want to say you know it's rare, it's rare rur in the wholesale space, right, we're almost meeting our retail partners very closely to where they operate and then handing off the ball at a very close distance for them to speak with their. So we're taking a lot of that friction away that happens in a trade with, with a lot of these tools, right and so that's just good basic blocking and tackling which champions are made from right. So you know. So, from that perspective, you know, I've been living and breathing that for a long time, so for me that's very meaningful. And, you know, if you're someone that's with our organization, you have access to those tools. You know the world is your oyster, right. I mean, you know you're, you're, you're your own entrepreneur. You're, you're, you're the CEO of your team, of your space.
Daniel Ball:Yeah, I think access is has been just a big, you know access to product, access to tools like the modeling I touched on earlier, access to carriers, right.
Daniel Ball:So, you know, I know a lot of smaller wholesalers or other shops might not have access to every market and I'm not saying we have access to every market available in in the country but we have the big ones and we have the main players in our Hab space, right, the Hab space that we're on a podcast talking about. So we we are lucky to have, you know, a leadership team that that makes sure we have the correct appointments that allow us to do our job. We're using the data that we have to try to create, you know, new products, create cap products, great needs, fill needs in the marketplace, because there's there's just a need for capacity right now. And if we can somehow create capacity, if we can take our data and go to a insurance company and say this is what we want to write, we want to write this is, this is what we have, this is the lost history. You know that we've accumulated over the years and help us do the, help us create a program.
Daniel Ball:That's really big right now and that's a really good talking point to make to our retailers in a really competitive marketplace to be able to tell them that we have access to all these products, and not only all those products, but exclusive products that we can use to help save your insurance money. And that's how they win deals and, you know, form build relationships. So it's a big, it's a big tool to have access, or it's a big, you know, luxury to have access to all the markets that we do.
Scott Gordon:Well, david and Daniel, thank you so much. This has been great. You can get up out of your chairs and wait. No, there's something else we do at the end of the podcast. Sorry, you can't leave yet I've been standing. This is something we like to call rapid fire.
Amanda Knight:All right, let's go.
Scott Gordon:If you could have an unlimited supply, an unlimited supply of one thing, what would it be?
Daniel Ball:Talent capacity for a frame and jam construction.
Amanda Knight:Oh man, I think that's a pipe dream. Ok, and one more what?
Scott Gordon:what item is worth spending more money on? Don't go cheap.
Amanda Knight:You don't buy generic something you splurge on. Sushi. Oh yeah, I could see cheap sushi could be a bad idea.
David Pagoumian:I want cheap sushi. Well, you can eat sushi.
Daniel Ball:No golf courses. I can't stand a really poor golf course. You don't want to hit a cow, right? Yeah, you want nice greens, you don't agree?
Amanda Knight:Well, Dave and Daniel, thank you so much for taking time out of your day to join us. If you're a listener, thank you for joining us as well. Providing current insights into the marketplace is just one more way CRC Group is placing you first. We'll see you next time.
