Over recent years JLT Specialty’s European Real Estate team have been predicting that the real estate insurance market would remain competitive.
With the exception of ‘distressed risks,’ unoccupied or void properties and those that are potentially at risk of flooding this has been the case. The 2016 real estate insurance market offers little to change this way of thinking.
As with previous years, and notwithstanding the impact of Storm Desmond, there is little to fear in the next 12 months for real estate portfolios that have good risk management procedures and claims experience.
Market background issues
Continued historically low interest rates and fluctuating stock markets mean that investment income remains low. The continued increase in quantum from both liability and physical damage claims continues unabated. The Combined Operating Ratio (COR) or Return on Capital Employed (ROCE) remains above the underwriting breakeven point for most real estate insurers.
These factors sit against a backdrop of an extremely soft market, where for a number of years the prices charged are considerably below the perceived market norm and the technical price an insurer should charge. As a consequence, we expect to see continued pressure to minimize costs and improve margins and are more likely to see the potential for additional mergers in the insurance sector.
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For further information, please contact Nigel Todd, Head of European Real Estate on +44 (0)20 7558 3549