The U.S. property practice leader of broker Marsh says Superstorm Sandy will likely drive rate increases as the Jan. 1 renewal season approaches.
“Some carriers will push for rate increases,” especially for accounts with losses from the late October storm, said Duncan Ellis during a Marsh webcast for clients.
The Northeast storm, which caused massive flooding from storm surge, power outages and physical damage, makes rate declines doubtful, said Ellis, though he added that “flat is still possible.”
Carriers are also expected to pay more attention to a policy's terms and conditions, deductibles, and language related to storm surge.
Ellis explained that some policies include storm surge as a flood peril, which is sublimited. Other might include storm surge as a wind peril, which is not sublimited. Clients may have made a “trade” with carriers, agreeing to include storm surge as a flood peril in return for a break on premium or to get more capacity if needed.
Ellis also told clients to expect “some carriers [to pull] back” from Northeast exposure after two straight years of significant storms hitting the area.
The size and complexity of claims are increasing as clients begin to fully understand the extent of losses, reports Ken Giambagno, leader of Marsh Risk Consulting's forensic accounting and claims services.
“Loss estimates are well-beyond initial expectations,” he said.
Clients have realized damage is resulting in the need to replace rather than repair.
The quantification of business interruption and contingent business interruption claims is also becoming complex, Giambagno added, as clients add time-element expenses for relocation, repair and reopening.
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