The insurance industry is presently facing a notable transition, referred to as a "hard market," marked by an increase in insurance premiums and a reduction in the availability of insurance across various sectors. This industry-wide shift, as defined by the Insurance Risk Management Institute (IRMI), is characterized by rising premiums and diminishing insurance capacity to meet demand, and it is not confined to specific carriers, affecting the insurance industry as a whole.

What does that really mean?
The insurance industry has encountered several back-to-back unprecedented events over the last several years that have compiled to throw the industry into its existing hard market.

• Catastrophic weather events and the corresponding record-breaking losses have exceeded the premium collected to cover these losses.
• Reinsurance carriers (insurance for insurance carriers) have provided the backing to cover the excessive costs of these large losses and, therefore, had to raise their premiums (charged to insurance carriers).
• Inflation has caused substantial increases to the cost of goods (repair and replacement materials) and the cost of labor meaning the cost to repair vehicles and homes has skyrocketed.
• The volatility of the financial markets has made it difficult for insurance carriers to increase the value of their investments to appropriately fund and offset these unprecedented losses. Insurance carriers use investments as a key contributor to bridge the gap between premiums collected and losses incurred in order to remain profitable and solvent.
• Social inflation has also been named as a contributor to the current hard market due to an increase in defense costs incurred by insurance carriers acting to protect their policyholders.

Hard markets have previously been noted to last three to five years, with the last true hard market cited from 2001-2004.

What does that mean for your business insurance?
Insurance carriers will implement a variety of strategies to combat these challenges. For the policyholder, it may result in the form of:

• Increased premiums.
• Limits on the types of policies or endorsements typically offered and restrictions on application for new policies.
• Implementation of minimum deductibles for policies.

A popular option to aid in the burden of increased premiums and higher minimum deductibles is the addition of deductible buy-down (or buyback) policy. This additional policy allows for insureds to carry a higher wind/hail deductible on their primary policy (reducing premium), and a separate lower cost policy that would reimburse the difference from the primary deductible and the deductible agreed upon in buy-down policy (meaning an overall lower deductible cost).

While conversations surrounding insurance may not be among your favorite things, it is important to know what is going on. Our goal at Bravera Insurance is to work with you to explain the intricacies of the insurance world so you can make the best decisions possible.  While insurance may not always be able to deflect financial inconvenience, we will work tirelessly to be sure it protects you and your business from financial catastrophe.

If you have any questions or would like more information on a deductible buy-down policy, please do not hesitate to reach out to Bravera Insurance at 877-483-6811.