Higher property insurance rates forecasted for 2023

There have been many worrisome reports regarding property insurance rates during the past few years. This has been particularly true when considering the reinsurance market and the impact it has on the property insurance market.   

While many of these reports have caused consternation and concern, they have ultimately been without merit. Reports of property insurance rates being incredibly challenging during recent years have called to mind Mark Twain’s memorable reply to an English journalist who had questioned the famous author and humorist regarding rumors he was dying, “The report of my death was an exaggeration.” 

However, we cannot overlook worrisome indicators which have revealed themselves during the past few months. These indicators forecast sharply higher property insurance rates for business owners this year. Following are a few metrics supporting this forecast:  

  1. The reinsurance market as a whole has not shown a profit during the past seven years.  
  2. The occurrence of natural disasters (catastrophes) has increased, not diminished or relented; 
  3. Post 1/1/23 reports from various reinsurance brokers provide alarming news. They indicate +25% – +45% increases in catastrophe loss-free treaties. Treaties associated with catastrophe losses are increasing by +45% – +100%. Rates are skyrocketing regardless of loss experience.  
  4. Overall market capacity in the reinsurance sector is expected to continue its decline throughout 2023. In 2022, capacity declined and was deployed differently, causing retail carriers to offer smaller limits and more constrictive structures. 

What does this unsettling news indicate for buyers of commercial insurance property policies?   

Unfortunately, “pain” is the word best describing the situation. The commercial property policy of a few years ago containing “blanket limits,” for example, and having 100% of the limits provided through one carrier is becoming a thing of the past. Brokers will be required to fight harder for their clients to gain every advantageous coverage term.   

Another significant issue facing buyers of commercial property insurance policies is new scrutiny of property valuation by carriers. Carriers can be expected to ask what is the true replacement cost of your property following a loss?  

During the past few years, carriers have not required or queried insureds to modify or increase the insured value of their property, both real and personal. However, carriers are now paying attention and requiring an increase in valuation in the face of supply chain disruptions, an increase in building material costs associated with inflation, and no previous, consistent application of valuation. Carriers are now paying attention and are requiring an increase in valuation. Some carriers will work with their insureds, while others are changing values unilaterally.   

The net result of all this activity is threefold:  

  • Rates are increasing 
  • Policy structure is changing  
  • Valuations are increasing

Put energy into carefully reviewing your property schedule and your property values. Be aware of the impact any changes might exert on the way your policy provides the coverage you’ve come to expect in the past.      

What steps should buyers of commercial property insurance policies take? Helpful ideas include the following:   

  • Be realistic regarding your property valuation. If the insured value of your building works out to $90/sq ft. you should be aware someone is going to call you out on it. Be prepared. In this market, you don’t want to alienate any potential carriers by your unwillingness to reflect reality in your valuation model. 
  • Know your property 
    • What life, safety, and health systems are in use?  
    • Are these systems functioning and up to date?   
    • What are the weak points that could expose you to a loss?  
    • Are you addressing these weak points, or do you require assistance to do so? 
  • Describe your operations and process and what you are doing to protect your property? 
    • Do you have a process to manage housekeeping?  
    • Have you ever had the local Fire Department conduct an audit of your operations?  
    • How do you handle hazardous / flammable materials? 

There are many other positive actions you can initiate. Start somewhere so you aren’t caught flatfooted at renewal time. Your trusted insurance broker can provide valuable assistance with this process.  

Kevin McPoyle, CIC, is President of KMRD Partners, Inc., a nationally recognized risk and human capital management consulting and insurance brokerage firm with offices throughout Pennsylvania. Kevin can be reached at [email protected] 



A Conversation With: Steven Buterbaugh

(Photo: Submitted)

Steven Buterbaugh, 54, is president and CEO of York-based McConkey Insurance and Benefits, which he joined in 1991. He holds a chartered property casualty underwriter designation and is active in numerous insurance agency councils.

Buterbaugh earned a bachelor’s degree in finance from Millersville University, where he was also a four-year letter-winner in golf. He served as vice chair for the 2015 U.S. Women’s Open in Lancaster.

He and his wife have three children and reside in East Hempfield Township.

Q: What are the keys to understanding the different nuances of each property and client you insure?

A: With each client we do a risk assessment to better understand the personality of the management team and the company in general and what direction they want to take, then we help them outline their exposures to risk, and then we try to match up solutions, which could be risk management safety programs, as well as insurance coverages, to make sure there aren’t any gaps for any of their exposures.

McConkey has history dating back to 1890, and you have been with the company since 1991. What is the most significant change you have seen in the industry during your career? 

McConkey has grown exponentially. I think I was employee No. 25; we have nearly 100 employees now. We used to be an insurance agency, and McConkey has evolved over my career into more of a business-adviser partner for our clients where they count on us for all aspects of their business. There is a lot of competition out there and it’s tough, but there’s more competition in every industry. But changing from a focus on insurance to being a director, an adviser, a partner of our clients, that’s evolved and I think clients really enjoy that relationship.

A recent company blog post noted that business income is often overlooked in companies’ property coverages. Why is it overlooked and how can it be addressed?

It’s a complicated process because you have to identify the key exposures for the client and you have to match that, evaluate how much insurance you need by analyzing the financial statements and the programs the clients have in place for catastrophes. When there is a catastrophe or a big loss, you need to make sure there is enough insurance in place to help them stay in business along the way until they rebuild and can get back up and fully running. It’s a pretty technical process and you need to sit there in kind of an interview format with the client and really understand their business so you can get their buy-in to purchase the proper amount of coverage. You have to talk doom and gloom and catastrophic impact to get their buy-in and understand there is a product to keep them in business while they’re out of business.

You were part of the team that brought the 2015 U.S. Women’s Open to Lancaster. What was the highlight of that for you?

Just seeing the community rally around that event. We brought $25 million to $30 million to the local economy; we had 2,500 volunteers sign up online the first day; we had 135,000 people attend that week at Lancaster Country Club and some people have called it the biggest, greatest sporting event ever in Central Pennsylvania. That has to do with the attendance, the community, the passion – the fans and the community in general were awesome. I stood on the 18th hole the first day of the tournament and just kind of said “wow” to myself when I looked out and saw the mass of people. The other thing that was great was seeing that team, all of those volunteers, moving as one.