The insurance industry has been in a hard market for the past three years. Though there are signs that there may be some softening in 2022, most experts agree that only certain sectors or certain policies may see some relief, while others may not. Properties with a good history, updated electric, and excellent life safety devices may experience only a slight 2%-4% increase in their package policies. Properties with unfavorable loss history, will probably see a much higher increase.
The package policy may be the most stable? one in terms of rate increases in 2022. D&O premiums are on the rise due to many suits lodged against boards of directors. Cyber Liability policies are seeing large increases because breaches and hacks are up over 20% from last year. Commercial Umbrellas, which have been the biggest culprit the past few years in terms of the highest percentage of premium increase on a single policy, continue to raise premiums and change the terms and conditions- typically not in insured’s favor.
These high limit umbrellas are a part of a Risk Purchasing Group managed by program managers. They are not dealing with one carrier, but typically several. This means that they have to deal with several different carriers, their rate changes, and their policy changes. Because of many factors, the largest being these large Labor Law claims in New York, we have seen and will continue to see these the Umbrellas experience increases and changes, and even a withdrawal from the marketplace by some of these programs.
Recently, one of the Umbrella programs announced that they will now be Excess instead of an Umbrella. This means that they will not provide coverage for something the underlying policy is silent on. In terms of a co-op or condominium, the biggest change area will be the lack of excess Lead coverage, as most underlying General Liability carriers that don’t exclude Lead are silent on Lead coverage.
Another Umbrella Program has a Contractors Warranty in it. This basically says that any contractor hired must maintain certain limits, not have an injury to employees exclusion, and must name the co-op/condo as Additional Insured on their policy or else the Umbrella for the co-op/condo will not provide coverage for a suit lodged by an injured contractor. It is difficult enough for the board and property manager to police this for the contractors they hire, but it is nearly impossible to police it when sub-contractors are hired by those contractors, which often happens. Throw in the fact that most contractors have an Injury to Employee exclusion in their policy, and an association could be paying for coverage that won’t be there when they need them.
You need to discuss any detrimental exclusions the Umbrellas may have with your broker. If you have an open Labor Law claim as mentioned above, don’t be surprised if you cannot get coverage with one of the Umbrella Programs and have to take a standard Umbrella with a $5M or $10M limit at five times the cost of the expiring one.
Long story short, with 2022 in sight, we suggest that you budget for at least a 10% increase. If you have had some claims, have not updated your electric, or don’t have all of the bells and whistles when it comes to life safety, budget more than that, so that you are at least somewhat prepared for the upcoming increases.