The property insurance marketplace experienced the second-worst loss year on record in 2011, including the worst Q1 and Q2 ever. A multitude of major loss events—both at home and abroad—have affected pricing and capacity on a global level.
On a worldwide basis, the last 18 months has seen serious earthquakes in Japan and New Zealand; flooding in Thailand, Australia, and Brazil; and an Australian cyclone and resulting flooding. Here in the States, we have endured major flooding along the Mississippi River, Hurricane Irene making landfall in the Northeast, devastating tornadoes in Joplin and the Southeast last spring, and even more tornadoes in the Ohio Valley, Alabama, and Texas this spring.
Putting aside these major domestic and international catastrophe events, a rash of hailstorms has plagued the Midwest and Western states (especially Texas, Oklahoma, and Colorado), while fire losses have been on the rise. Add on the full-fledged rollout of RMS version 11, which is drastically increasing probable maximum loss (PML) and average annual loss (AAL), and the current adverse market conditions are either “hardening” or “hard,” depending on whom you ask. All of these factors, plus higher carrier combined ratios and lackluster investment income, have led most insurance companies to significantly change their appetite and behavior with respect to real estate risks generally, and multifamily accounts specifically.