Amwins: 'More challenging than ever' to place first $5 million of real estate/hospitality casualty cover

By Mia MacGregor

July 14 - (The Insurer) - Increasing claims, tightening capacity and escalating rates are placing significant pressure on the real estate and hospitality insurance markets, according to a new report by Amwins.

In its report, The Real Estate and Hospitality Casualty Markets Face Challenges in Capacity and Rate, Amwins noted that these sectors are contending with increased claims frequency and severity, prompting the withdrawal of long-standing programs and leading key E&S players to reevaluate their strategies.

Amwins highlighted that the E&S liability market is struggling to match the pricing and coverage levels of previous standard offerings. As a result, insureds are being forced to choose between broader coverage with higher retentions or more restrictive coverage with moderate rate increases.

The report also noted that average excess limits carried by property owners continue to shrink in response to overall price increases. “It’s now more challenging than ever to place the first $5 million of coverage, with most markets limiting capacity at $2 million to $3 million for the primary excess layer,” the report stated.

Hospitality venues, particularly those with liquor-driven exposures such as bars and nightclubs, are encountering further difficulties as many admitted markets either non-renew policies or impose significant rate hikes.

Additionally, Amwins said that assault and battery coverage is becoming more restrictive and expensive, with most E&S carriers now requiring premiums exceeding $100,000 for A&B limits of $500,000 to $1 million. Hired non-owned auto coverage is also under pressure, with premiums surpassing $25,000 in some cases.

Carriers are introducing a growing list of exclusions, including human trafficking, sexual abuse, and firearms and weapons, according to the report.

“We expect this to continue as many carriers believe rates are still inadequate for the exposures that many of these risks present,” Amwins stated.

Liquor liability remains the most pressing challenge for the hospitality industry, the report noted.

Amwins also highlighted that tort reform is gaining traction in several U.S. states, with laws either passed or proposed to limit the economic impact of litigation on businesses and the broader economy. States such as Alabama, Florida, and Georgia have enacted or proposed legislation aimed at reducing litigation’s economic impact.

While the full effect of recent reforms on real estate and hospitality remains to be seen, Amwins said that it anticipates that the changes will result in fewer cases going to trial and provide insurers and defendants with additional defenses, thereby increasing risk for plaintiffs.

“This shift is expected to encourage more settlements, ultimately reducing legal expenses and the occurrence of nuclear verdicts,” the report stated.

Amwins advised that while rates are a key consideration, broader financial risks should not be overlooked, and long-term relationships can provide greater leverage in the current market.