Real Estate Market Conditions: November 2020



26 November 2020

The insurance market, like the rest of the world, is seeing significant levels of change, which has, and is continuing to impact the Real Estate sector. We are seeing restrictions in cover, increased premiums and total withdrawal from the market, become the norm.

The below article provides our view of the current conditions and how these have developed over the past couple of decades. We also present a number of strategies that should be adopted by those in the Real Estate sector to try and help you achieve a favourable outcome when it comes to your insurance renewal.

From 2003 to the current market conditions

From circa 2003 (post 9/11 impact) through to mid-2019,  the Real Estate insurance market had been in a cycle where continued over capacity and relatively benign loss scenarios resulted in significant rate reductions, as an average year on year, across all occupancy types.

Over that period, we have seen on average net rates reduced by circa 60-70% from pre-2003 levels, as a result of both the rate reductions and an increase in commission levels achievable.

From mid-2019, the market began to look to move rates upward, on a case by case basis, to a position - post the 2020 Reinsurance Treaty renewals - of across the board rate increases; the imposition of restrictions in the availability of coverage as well as a concerted effort to significantly reduce commission levels. For more detail, read our recent publication.

In the current market, we have observed Carriers pushing for an average +20% rate increase on clean risks, as well as commission reductions, through to significantly greater rate increases on more problematic renewals, and in some cases even providing no terms at all.

Residential facilities

Certain classes of occupancy, such as the Residential are seeing even more substantial increases in rate than the average commercial portfolio.

Specifically in relation to Residential, those people living in blocks of flats that have exterior cladding have seen the market move significantly. Although cladding has been recognised as an increased combustible exposure for a number of years, recent losses - including but not limited to Grenfell - have caused the insurance market to react.

We would always advise clients with cladding to:-

  • Work with your incumbent Insurers wherever possible. They will look to work with you to help find an economic solution;
  • Plan well ahead of your renewal and understand in detail the type of cladding your building incorporates. Wherever possible secure a specific analysis from a cladding/structural surveyor; review the potential and cost of removal and initiate appropriate discussions to determine if you qualify for Government funding to remove;
  • Discuss your plans with your Insurers/Broker in detail;
  • Expect increases in both premium and excess levels. The increased exposure that cladding brings, combined with current market conditions, are driving the cost of Fire insurance upwards;
  • In recent cases, some residents have chosen to highlight the level of premium increases being borne to the media, trade bodies and local MPs. While the rationale for doing so is likely to assist in driving a broader solution to the issues created by cladding, the fact remains that there are a limited number of Insurers in the market that will cover such assets - due to the increased level of risk involved - and that is the significant factor in driving premium costs. Insurers will take into account a wide range of factors when determining whether to offer terms on any risk and – as with all businesses – will be extremely wary of the possible perception of profiteering when, in fact, they are attempting to offer a solution to an issue which has been permitted to develop over a number of decades.

The future of the market

As part of our continued monitoring of the market, we see the market continuing to harden for at least the next 12-18 months and would anticipate:-

  • Increase in rates across the board
  • Further reductions in commission levels
  • Withdrawal of acceptance to underwrite on broker market wordings
  • Reductions in available capacity
  • Potentially no coverage at all for distressed risks on economic terms
  • No availability of Long Term Agreements or fixed price 2 or 3 year deals
  • A greater emphasis on risk management and more imposition of risk requirements from carriers.

This is before the full financial impact of Covid-19 on the insurance market is felt.


Following the recent conclusion of the FCA test case, as previously repudiated losses may now be afforded some level of settlement, it is anticipated that Covid-19 could become the single largest loss event ever incurred by the Insurance market[1].

This will not only continue the enforced disease/non damage exclusions on policy wordings, but will no doubt create an even greater requirement for increased Treaty Reinsurance costs which will, in turn, ultimately be passed onto the Property sector.

Although not guaranteed at the time of writing, it is also possible that the lack of coverage available for future similar events may force the Government to consider a “Pandemic Pool” type arrangement similar to the establishment of Pool Re for Terrorism events.


Finally, clients with assets across Europe should also prepare themselves for changes in insurance structures post-expiry of the Brexit transition period. We would anticipate a restriction in both Brokers’ and Insurers’ ability and willingness to participate from London, which will reduce available capacity and, as a consequence, increase cost. 

Wherever possible we continue to advocate engagement between Clients and Carriers, and believe that building and maintaining direct relationships will not only help navigate the current difficult market conditions, but also assist in achieving the best terms available in these challenging times.

It may be challenging times but the Howden Real Estate team has the right attitude, expertise and understanding of the current market issues to confidently deliver insurance solutions for clients.

For further information on how the Howden offering could help you and your business, please contact our specialist Real Estate team.

Gary Reed - Head of Sales, Howden Real Estate

A photo of Gary Reed