[Report] 2022 Multi-Family Mid-Year State of the Market

[Report] 2022 Multi-Family Mid-Year State of the Market

2022 marks another year with a hardened market. The soft market ended in late 2018 and is
not expected to return anytime soon. Because of macroeconomic trends, the market
continues to harden. As a result of this, underwriters are expected to continue viewing the
multifamily asset class with caution for the foreseeable future. We can also expect
underwriting guidelines to become more fragmented based on asset characteristics and
location.

Real Estate owners and property managers need to differentiate their risk profiles by
highlighting strong risk management protocols, operational controls, and claims management
policies. It is imperative that these processes are clearly communicated with underwriters.

Underwriting Trends

Labor Shortages

Underwriters, particularly those working for carriers with an appetite for
habitational accounts, simply have more submissions than they have time to work
on. This is due, in large part, to staffing constraints across the workforce. We also
believe that carriers have an interest in limiting the number of submissions their
teams can process. Simply put, no carrier wants to open the flood gates and lose
control of the accounts they are writing by hiring inexperienced underwriters who
may push to put new business in the books without applying diligent underwriting
standards.

Modeling

Carriers continue to develop in-house modeling capabilities, with most relying on,
commonly used, CAT modeling. While the best underwriters use models only as a
guide, models and prescreening systems often help carriers determine on which
submissions to focus. They want to allocate time to accounts that these processes
indicate are likely to be won.

What to do about it:

The submission process needs to be controlled and planned. The days of sending
generic submissions to every carrier under the sun and expecting competitive terms
in return are over. Additionally, asking an underwriter to quote excess property
layers ten different ways yields poor results. Your insurance broker needs to
pre-underwrite your account, and design a marketing plan that appeals to carrier
appetites for risk. Providing a clear direction to underwriters by painting a favorable
picture of your exposure will render the best outcome.

Real Estate owners and property managers need to view submissions to carriers as a
proposal. Underwriters, especially those likely to offer competitive terms, have
more leverage in a hard market. Viewing and treating the marketing process as a
partnership between the insured and carriers yields better terms and more
transparency, as well as improved turnaround times for feedback from carriers.

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