Real Estate Market Conditions Jan 2020: What you need to know


20 January 2020

Over the last six months, the UK insurance market has significantly hardened. For a number of years, despite poor underwriting and investment returns, “soft market” conditions have generally prevailed. But with a greater focus on well-managed risks; insurers have begun to increase premiums in part to compensate for mounting liability and catastrophe losses as well as lower yields on fixed-income securities.

Looking specifically at the Real Estate market, there has been significant change throughout the course of 2019. In this regard, one insurer has pulled out of the Real Estate market and another has put their Real Estate account in to run off following a strategic review of their business. Brokers have naturally had to place their business elsewhere which has used a significant amount of capacity in the market giving insurers the ability to be more selective with the business they’re willing to write. As a result, insurers are requesting increased premiums, particularly in the residential sector.

In this market, the ability and desire of your insurance broker to achieve competitive and appropriate terms is of paramount importance.

Brexit update

The extension date (or “flextension”) means the UK is able to leave the EU with a withdrawal agreement at any point up to 31 January 2020. If by that date the UK still cannot agree a deal with the EU, then we may be faced once again with a hard Brexit.

As of 19th December, the government announced that the Department for Exiting the European Union (DExEU) will be “wound up” on the day the UK leaves the EU, 31st January 2020. 

For Howden this new date does not change our preparation for exiting the EU. We have established entities in the EU, which will be used to service our clients - as have many insurers. 

We will keep you informed as and when decisions have been made by the UK government and in the EU over the next couple of months.

Looking ahead to 2020

The recent general election seems to have had an effect on the market; a number of significant deals were finalised before the end of 2019 with circa £1.8bn worth of transactions occurring in the last week of the year.

In 2020, we’re anticipating additional capacity coming to the market; one new insurer has recently opened for business, and we expect other insurers to follow. We also believe that other markets are looking to reposition themselves as a more viable alternative to take advantage of what is perceived as a rising market. It will be interesting to see how the market responds to current opportunities as the new entrants will be looking to aggressively grow their books, especially for well-managed portfolios.

In the past, some brokers could be criticised for ‘post boxing’ risks to the market rather than adding value by reviewing and understanding the risks before selecting the appropriate insurers. In the current challenging market conditions, working with a specialist broker to present the market with quality underwriting information and a structured risk management approach will assist with the placement of your portfolio.

As ever, the reinsurance market will be key as to insurers’ appetite throughout 2020. 2019 saw a limited amount of storm-related claims in the U.S. compared to previous year, this can also be said for floods in the U.K.

That said, underwriting information and good risk management by property owners and investors will play a part; businesses should be requesting risk management funds from their insurer by way of their brokers in order to assist with this.

Ultimately however, strength of market relationships will be key to any negotiation. Howden maintain strong relationships with a wide number of insurers and have considerable financial strength, handling in excess of £2 billion in premium annually and, as part of the Hyperion Group (now known as Howden Group Holdings effective of 5th Nov), is the largest producer of direct business into Lloyd’s.

Please do speak to your Howden representatives if you have any questions.

Ben Searing, Associate Director

Speak to Ben, or anyone from our Real Estate team, to find out more

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