This article was republished with permission from Risk & Insurance.
By Andy Hendrix
COVID-19 has wreaked havoc across the world, and especially in the United States, in a way none of us could have expected. While schools are reopening and staying socially distant is top of mind, the implications on the U.S. property insurance market are not often discussed with nuance.
As an underwriter, I have seen how much the property market has changed in just six months. In particular, three larger macro trends are influencing the industry:
- The impact of COVID-19 on how public entities purchase insurance
- The increased financial stress on clients and insurers
- The pandemic’s overall contribution to the already hardening insurance/underwriting market
While these trends all seem discouraging, there is a silver lining: higher levels of collaboration between insurers and clients as we work together to ensure relationships remain strong and the insurance industry changes for the better.
1) Public Entities
First, let’s dive into an area hit particularly hard — public entities.
Because tax revenues are down due to the lack of business in municipal areas, local governments and publicly-funded entities may not be able to afford the coverage they once could. Due to COVID-19, the closing of restaurants, bars, retail shops and much more has meant local and state tax revenues are down.
Without the extra spending power, insurance for property may be seen as a logical cut.
However, risk is not going anywhere; public entities in particularly risky areas could potentially leave themselves vulnerable to much worse loss in the event of a major natural disaster. With hurricane season peaking, municipal governments will have to grapple with the classic “Should we or shouldn’t we?” approach to protecting against property damage.