Climate change forces a review of how to profitably underwrite business: RPS’ Nadler

The year has seen unprecedented weather events that are making climate change hard to deny, according to Risk Placement Services’ Christa Nadler. The climate conditions are also forcing insurers to review how to profitably underwrite business, the executive told The Insurer TV at the WSIA Annual Marketplace 2023.

“If that means maybe having to charge for some of these secondary perils that they haven't been charging for, or maybe increase the charges for those types of perils, we're definitely seeing that,” said Nadler, who is executive vice president, property brokerage at the wholesaler.

Regardless, she said carriers have to find ways to make a profit on their underwriting, as she pointed to actions such as the use of freeze and water damage deductibles in policies.

“I think the markets are having to take a step back and look at how they're underwriting business and make sure that they can find a way to underwrite business profitably,” said Nadler.

The executive also suggested that flood can no longer be treated as a secondary peril, or a coverage that is added on to a policy rather than automatically included.

“I think there is an increased understanding that flood is a major peril and that it's something that we need to look at,” the executive said.

She also noted that the take-up rate on flood has historically been lower than the industry would like it to be. Key to reversing that, said Nadler, is better education on the issue.

“We need to educate our agents and insureds on the importance of flood and the damage that flood can bring, and the reason that insurers do need to spend their premium dollars on buying flood insurance,” said Nadler.

E&S market solutions

Despite the unprecedented conditions, Nadler said the E&S lines market is agile, and able to find creative solutions for insureds.

“A lot of the standard markets are pushing wind and hail deductibles, right? So sometimes those deductibles might seem to be unaffordable for insureds. And the excess and surplus lines market has a solution for that – a wind deductible buy-down,” she said.

“We've had a lot of success, kind of finding ways to wrap around the standard market to find ways that we can continue to provide the insured with the best possible coverage and the best possible deductibles and in an affordable way.”

While the program has been available for a few years, Nadler said it is growing in popularity.

“I mean, we're definitely seeing a higher take-up rate on those types of policies than maybe we had in the past,” added the executive.

Nadler continues to see valuations as an integral part of the negotiation conversation, one that demands transparency.

“Valuations [are] an issue that's going to continue to be a topic, right? I mean, we're continuing to see that it costs more to replace something today than it did and, you know, six years ago, or five years ago,” said Nadler.

She also noted the impact of a harder reinsurance market on the property insurance sector.

“When the reinsurers push the markets, the markets have to push the insureds, and you know, that does trickle down,” the executive commented.

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