Charting A Course Through the E&S Property Market

Gain valuable insight into the ever-changing E&S property market with CRC Group's property brokers, David Christopher and Jonas Williams. This episode peels back the layers of market trends as the calendar flips from 2023 to 2024, highlighting the significant role of quota share and layered business in navigating complex accounts. Get ready to grasp the importance of precise property valuations and the innovative tools CRC leverages to help you win in today’s marketplace. 

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Chapters

• 1:16 How does the current market compare to 2023?
• 3:36 What factors are influencing the underwriting decision making process?
• 6:13 How critical are accurate property valuations for insurers and reinsurers? What tools/strategies can brokers employ to ensure precise valuations?
• 8:20 Do insureds understand the importance of property valuation?
• 9:51 In a market where pulling multiple carriers onto risks is often necessary, what options exist for creating tailored solutions?
• 13:39 How can partnering with a CRC Group producer help agents with property placements?
• 16:32 Rapid Fire!

Transcript

Amanda Knight: 0:23

Hello everyone. Today, scott and I are joined by a couple of CRC's property brokers. We've got David Christopher, a Senior Vice President and Property Broker with CRC Group's Dallas office, as well as inside broker Jonas Williams from our Birmingham Alabama office. This is the Placing you First podcast from CRC Group.

Scott Gordon: 0:42

This podcast features news and insights from a vast knowledge base of over 5,100 associates.

Amanda Knight: 0:48

Who write more than $35 billion in premium annually. Plus, we give you the latest information on what's happening at CRC. This, this, this is the Placing you First podcast, and now the hosts of the podcast, amanda Knight and Scott Gordon. Welcome to the podcast. It's good to have you both with us today.

David Christopher: 1:06

Thanks for having us. Thank you for having us.

Scott Gordon: 1:08

Okay, well, let's jump into this. We recently put out the written companion ENS property state of the market piece, and it seems as though 2024 is looking a little brighter than 23 when it comes to property renewals. How does the current market compare to 2023?

Jonas Williams: 1:27

What we've seen so far in 2024 is the market's kind of stabilized compared to what we saw in 2023. There is more capacity coming out domestically and out of London and Bermuda. We're seeing rates stabilized there, but reinsurers are still pushing for rate increases overall. So I don't think we're seeing rates stabilize there but reinsurers are still pushing for rate increases overall. So I don't think we're going to see a drop anytime soon. There's still a fair amount of demand out there, but not quite enough. Supply is what we saw five, six, seven years ago, where you saw large chunks of capacity coming out of single carriers, where you saw large chunks of capacity coming out of single carriers. We're seeing more quota share and layered business, especially on tougher accounts, and I don't think that's going to change anytime soon.

David Christopher: 2:16

I'll add to that. So the majority of the carriers that we're trading with, we're seeing an increased appetite. If you look at their combined ratios the carriers combined ratios they've significantly improved, which for the most part means that senior management is saying we want more and we need to get more as fast as we can while our profitability is up and rates are still up. So there's an increase in appetite. For sure, there's certainly a stabilizing effect.

David Christopher: 2:47

With reinsurance renewals this past year. Versus last year there's not quite as much of a crunch in Florida as there was last year. And then we've also got some new market capacity that's come in. That's allowed us to navigate some of the tighter placements where we were really tight down to the last market. Now we have markets that we can maneuver around and be more creative with. In addition to that, we have in-house products that I think are helping us every day, and our in-house products are getting more and more robust. So I think all of those factors, combined with what Jonah said, that's where the market is right now Still underwriting discipline, but we've got more tools to work with and a little more flexibility in the market.

Amanda Knight: 3:36

So with insurers sort of signaling a cautious readiness to embrace a little more risk, what sort of factors are influencing sort of the underwriting decision-making process?

Jonas Williams: 3:51

I think quality of data is still key for a lot of our underwriters and our carrier partners. You know, and valuations, they all kind of know what you know frame habitational would take to rebuild after a loss and they have these metrics and so they're comparing everybody's submissions to what they have internally and seeing if it adds up and if it doesn't, then they're seeing more than enough opportunities so they can happily pass if valuations are not adequate enough or if we're missing, you know, key information that would help them underwrite the risk.

David Christopher: 4:34

I'll jump in. I think the corporate the average combined ratio of the different underwriting companies is driving a lot at senior levels, a lot at senior levels. And then there's an enhanced demand for underwriting results at rate levels where these CUOs feel like the profitability is there to be had. So I think that's certainly something that you see. You see, companies are a lot more aggressive. Certain companies with the lower combined ratios are a lot more aggressive. Certain companies with the lower combined ratios are a lot more competitive and a lot more aggressive right now. If you go to the London market, the stamp capacity is up among syndicates across the board. So the majority of the London market is looking to grab market share. There's still a fair amount of discipline, like we talked about earlier, but I think all of those things are driving demand right now.

Jonas Williams: 5:29

Well, to add to that, last year, what we saw is carriers either had enough capacity or they didn't, and so the ones that had, they were opportunistic, and the ones that didn't have enough, they kind of had to sit on the sidelines and watch. You know, some of their counterparts write risks at high rates and capitalize on the hard market. You know, in 2024, I think we're seeing the ones that were opportunistic or trying to hold on to what they have, and the guys that you know were more cautious last year they're looking to grow this year. So there is some wiggle room and placements and trying to get some new capacity on accounts that maybe wasn't available last year.

Scott Gordon: 6:13

So, in the face of rising property values and construction costs, how critical are accurate property valuations for insurers and reinsurers? What sort of tools and strategies can brokers employ to ensure precise valuations and mitigate these unexpected losses?

Jonas Williams: 6:30

As far as the property valuations go, all of our carrier partners, they know what it costs to rebuild a property after it's been damaged, so they have this data on the back end.

Jonas Williams: 6:43

So if insureds are not adequately valuing their property, you know they won't get a look sometimes from these carriers because they know what it costs to replace.

Jonas Williams: 6:56

And so what CRC has is we have tools that can help us guide our retail agents and how to value a property. And we can run it on the back end with our CRC SOV fixer, which takes any spreadsheet you know, regardless of the quality of data, and can help fill in third party information that it sources out from other places. But then too it gives us a low, a medium and a high range of expected valuations and we can share that with our retail agents and can help them have that conversation with their insureds on how to properly value their property. Are CAT models that you know, take the insurance information and run that through you know the AIR and the RMS model to kind of see where the insurance exposure is based on values that they've provided, and so that can be used as a tool again for our retail agents to have that conversation and help them determine, you know, what is their actual exposure to wind events, convective storm, to flood, to fire, and help them determine how much coverage they need to buy for those certain perils.

Amanda Knight: 8:19

David, before you jump in, I know you probably can also talk with us about how important property valuations are, but I know we talked about this last year right, especially after, you know, hurricane Ian struck in 2023. Itv valuation really seemed to be the theme of the year. So going into 2024, we're now, you know, wrapping up Q1. Do the insurance understand that? I know that some folks were having a hard time with valuation and how much they were really needed to increase in 2023. Has that shock sort of worn off at this point?

David Christopher: 8:56

I think the communication has been consistent over a period of 18 months to two years. We need to address valuation and that persistence of the underwriting market has led to an awareness that may or may not have been there in the past. And you know, obviously the best and ultimate you know test for valuation is to get a true replacement cost appraisal. That's not done overnight. There's a lot of planning and there's cost involved, and then the tools that Jonas mentions that we have are certainly there as well. But I think ongoing communication awareness has increased. So all of those things are playing into it. I don't think it's being lost. The awareness is a little bit more prevalent now than it was.

Amanda Knight: 9:51

So in this marketplace, where multiple carriers often have to be pulled onto a risk, what options exist for tailoring those solutions? I know we've talked about layering, we've talked about quota share, but you guys have also mentioned we have some proprietary products, some facilities that help with that. Do you guys use those? Are they helpful?

Jonas Williams: 10:10

Yes, I use them all the time, especially when we have some of our larger placements, our market carriers. They use the AIR or the RMS models or sometimes a combination of the two. It kind of helps us understand what they're seeing on their end. What can we expect from those carriers when they are running their models themselves? Now, of course, they're running it against their portfolio and seeing how that compares, but it does give us an idea of what is their probable max loss for a certain peril, or you know what is the worst case event that an insurer could have. You know which locations are going to get hit the hardest.

Jonas Williams: 10:54

So we can use those tools and use our relationships with our market carriers to have better conversations and more directed conversations around how do we want to place this specific risk.

Jonas Williams: 11:09

We're very transactional and so we're often using the same underwriters for different risks, because they know what each carrier wants to do in a certain layer or in a placement and they're familiar with the terms that their counterparts are putting out there. So we can use that relationship to leverage the opportunity to write other accounts with those same carriers. And so those are just some of the tools that we have that can be used to place accounts. But we also have our in-house insurer risk spectrum facility, which is a quota share or a me too facility, and so they follow behind. You know several of our carrier partners that they have agreements with and can help fill out capacity, and that can be really useful. We're using them all the time to place tough deals or deals where, you know, not every market has the same price in a layer and they follow maybe one of the cheaper markets in the layer and so it can help fill out that capacity at better pricing than we would be able to get otherwise.

Amanda Knight: 12:21

And if I'm not mistaken, we also have our insurance builders risk facility that rolled out in January. Have y'all had any experience with that yet?

David Christopher: 12:29

I would say the insurer's property tools have been very valuable to us. You know, we can quote wind deductible buybacks from our desk. We have enormous flexibility with an in-house underwriting team that's very senior. They're well equipped to handle and manage the different placements that we're involved in, which is refreshing A lot of times. You know, you don't always have the luxury of working with senior underwriters, but the in-house team is certainly excellent in terms of just quality of underwriting. You know, I feel like it gives us an option on just about every placement to pick out a spot where we can apply some pressure to the existing pressure you know the existing placement, excuse me and create an enhancement. Or, if it's an account that we don't currently write, we look at it and we go, oh, we can put insure risk in this spot or that spot and, you know, create some restructuring that might bring a client some savings. So we're looking at using those tools to be more creative every day.

Scott Gordon: 13:40

Whether it's placing business or working through a claim. You know, at CRC Group we pride ourselves on being specialists that can help get the job done for our retail partners. How can partnering with a CRC Group producer help agents with property placements?

David Christopher: 13:54

I think you know we try to be consultative. It's not like we bring valuation to the table and say these are the values that you have to use for renewal. Our team, we talk about it all the time. We're trying to engage a customer with information, to bring a value added and a knowledge and awareness, but we're a consultant. We're providing them with feedback. So I think most of the brokers within the company are very collaborative and consultant with the clients. I find that when we can create partnerships that go both directions we listen to the customer, the customer listens to us, we collaborate. That collaboration is very powerful. Many times we even bring the insured into the middle of that discussion. So those are ways that we can create a better outcome, and part of my background is spent 11 years on the retail side. So bringing in the retail client, bringing in the buyer, the CFO CEO, into the discussion and really hearing from them is meaningful to the process, and I feel like we do and I think that's a benefit. You know we would try to do that wherever possible.

Jonas Williams: 15:09

Well, and to add to that, you know, one of the things that we really focus on on our team in Birmingham is to be service oriented to our retail customers. You know, by and large most brokerages have access to the same markets. You know, of course we have our insurer risk products, but by and large we all have access to the same same markets. So the one thing that we can control is service. And so if a retail agent has an existing relationship with a CRC broker, you know David and I are specialists in property, so that's all we focus on is property. But if somebody comes to me asking about casualty or trucking or professional lines, they have a contact person within CRC and we can kind of help direct them to the right service or product that CRC provides. And CRC is looking to grow those all the time we're coming out with new or we're purchasing, I guess, more and more companies to kind of help add value to what CRC can offer our customers so that we can be more of a one-stop shop for the retail agents.

Amanda Knight: 16:22

Absolutely.

Scott Gordon: 16:23

This was very informative. Thank you, guys, for never having been on the podcast. You sound like you've been on a million of them. You're both very excellent and before we go, can we do a little something fun? You guys mind.

David Christopher: 16:36

Let's go.

Scott Gordon: 16:40

These are all Amanda's questions and they're really good. This time I took a little peek at these, and this is something we like to call rapid fire, and it's just right off the top of your head, whatever comes to your mind. Our first question which famous person, dead or alive, would you like fighting by your side during the zombie apocalypse?

Jonas Williams: 17:02

I wouldn't be much good in a zombie apocalypse, but I think Achilles would probably be a good option right there.

David Christopher: 17:09

There you go yeah.

Amanda Knight: 17:13

You know, he'll be dragging me along, though. As long as you're alive, that's what counts.

Scott Gordon: 17:16

Yeah, yeah, that's what he's there for. That's it, david, you don't have anyone.

David Christopher: 17:20

Uh, let's go with Zeus.

Scott Gordon: 17:21

Wow, See these are much better. I was going to say Andre the giant, but Andre the giant was had a bad back. He couldn't really move that well at his old age. So yeah, I know I would have been a round one elimination. Question number two If you could appear on any game show, which one would you choose?

Jonas Williams: 17:42

I'll go with Family Feud.

Amanda Knight: 17:44

Good one. I hope your family is your family smart Like, are we taking everyone? Are you going to handpick your family members?

Jonas Williams: 17:50

I think I've got enough family members to fill out a team.

David Christopher: 17:55

You know I'm not picking everybody. I'll go with Jeopardy.

Amanda Knight: 17:59

Yes, hey see, I'm going with zero strategy and I'm going with the price is right because I know the price of household goods. I'm the grocery shopper for my house. I can totally I could kill it on the prices, right, 100%. What about you, scott?

Scott Gordon: 18:17

I'd have to go with the old Nickelodeon program Legends of the Hidden Temple where they get to run through like Indiana Jones, through a collapsing temple and collect prizes. I would have loved that as a kid.

David Christopher: 18:29

I'm going to stick with property for 5,000.

Scott Gordon: 18:34

Well, okay, speaking of property, since you guys are property brokers, this seemed like a good question. If your house caught on fire, what's the first object you would run in and save?

Jonas Williams: 18:46

I'm probably getting my insurance policy so I can file a claim.

Amanda Knight: 18:52

Good answer, Jonas.

David Christopher: 18:53

I would probably make sure I have the dog.

Amanda Knight: 18:56

There you go.

David Christopher: 18:57

Because if the dog didn't make it out, I would be put back in the house.

Scott Gordon: 19:01

See, I would have included that in the family, so I would have been like he's already out of there. I got another bonus pick.

Amanda Knight: 19:07

I think my insurance policy is in a fireproof box inside a safe, so maybe it would be fine. So I don't think I'd have to grab that. Kids are already out.

Jonas Williams: 19:16

Yeah.

Amanda Knight: 19:19

I think I've got all their baby pictures and stuff stored on like a flash drive or a disc or something. I guess I'd go for that because that's irreplaceable right.

Scott Gordon: 19:26

Yeah, my hard drive with the family photos would be mine. Yeah, there are no photo albums anymore, it's all on a stick so yeah, the computer.

David Christopher: 19:35

The computer would be one of the first ones, along with the dog.

Amanda Knight: 19:39

You got two arms, david dog, computer.

Scott Gordon: 19:42

Got it.

Amanda Knight: 19:44

Well, listen, it has been a pleasure having you guys with us today. Listeners, if you have not yet dug into the written companion piece titled less turbulence ahead in the ens property market, you can find it on team crc's website at wwwcrcgroupcom. You can click on tools and intel or simply search the title. Providing current insights into the marketplace is just one more way crc group is placing you first. Don't forget to subscribe and share.