The Hard Insurance Market for 2023

As a result of the hard market, we are seeing programs that were specifically designed for community associations being discontinued, insurance policies being non-renewed or cancelled, increasing property values and more insurance inspections.

I have been in the insurance industry for over 50 years specializing in the habitational sector and have seen the cycles that our industry goes through – known as the UP’S and DOWNS of the insurance market.  Today we are experiencing a HARD market in insurance.  This results in fewer carriers, higher premiums, higher deductibles, and restricted or limited coverage for habitational properties.

How are you coping with these changes?  According to the Foundation for Community Association Research:

83% of insurance professionals across the country are experiencing a significant number of policy cancellations.

96% are seeing significant policy premium increases.  For 55% of these policies, the annual increase ranges from 11 to 25%.

What is causing this rise in cancellations and insurance premiums?  Carriers are re-evaluating each account.  The habitational market has been seeing a rise in claims and increasing cost of claim payments, increasing property values and the aging of the community (especially those buildings over 40 years old and roofs over 20 years old).

Over the past several years, we have seen extreme weather events – floods, fires, record snow falls, and hurricanes.  In addition, we had the pandemic, supply chain issues, inflation, and high liability awards that surpass a reasonable or rational amount.  So, you ask, how does that affect us in Maryland?

Every insurance carrier will evaluate a risk to determine how much they will pay for the smaller claims. The carrier then purchases reinsurance to protect from a major loss.  Anytime there is a major insurable event, the payment of those claims comes from the reinsurance market.  As the reinsurance market pays out these claims, they raise their premiums to the insurance carrier.  Therefore, all of us are paying higher premiums because the reinsurance market has increased their premiums.

Even quality rated associations are seeing their insurance premiums increase.  How can your community survive in 2023 and beyond?

  • Start with a well-run, professionally managed community and understanding board.
  • Take initiative and try to avoid claims, identify issues, and correct them.
  • Evaluate your reserves to make sure the association account is adequately funded.
  • Continuously review maintenance and identify existing and upcoming repairs that need to be made.
  • Inspect your property for trip hazards.
  • Implement and use water sensors for leaking pipes and appliances.
  • Limit the number of rentals.

Start thinking about your insurance renewal in advance.  Now is the time to have an annual review of your insurance.  Be sure to discuss any upcoming insurance changes in coverage, property values and deductibles. Try to identify areas where improvements can be made to avoid claims.

Don’t wait until the last minute to take the necessary steps to prepare for your renewal. Contact our office for help.