Chief Financial Officers are facing another challenging year of managing risk and insurance costs. Here are some things to keep an eye on in our current market.

PROPERTY INSURANCE – BE PREPARED TO PAY MORE

The insurance market was expected to firm up in 2019, but the dramatic shift in some areas of California surprised even those expecting rates to rise.

The property insurance market has been buffeted over the past few years by record losses from Hurricanes Harvey, Irma and Maria, as well as the California wildfires. Another rough California wildfire season could pressure carriers to raise rates even further next year.

Impact

A firming market typically means higher premiums, tighter underwriting, and less competition for your business. Almost in unison, carriers have decided to recoup the recent catastrophic losses with rate increases. In some instances, those increases have been dramatic. Businesses with operations in earthquake and flood zones are likely to see the biggest rate hikes. Organizations with dated facilities could also see big premium increases. Now is a good time to upgrade older properties/assets or to consider disposing of them to minimize risk.

AUTO COVERAGE – RATES ALSO GOING UP

Like the property market, the auto insurance market will continue to harden. Due to a rapid increase in claim frequency due to distracted driving and the increased cost to repair vehicles, carriers are reluctant to take on more auto liability risk. Their unwillingness to do so points to the softening profitability of their auto portfolios.

Impact

CFOs that manage fleets will need to think creatively to find the best rates and coverage. Fewer insurers are willing to cover large fleets. At the same time, insurers are scrutinizing the hiring procedures and driver safety programs of clients. Companies with the best safety records are not being spared the double-digit rate increases others are experiencing.

DIRECTORS & OFFICERS LIABILITY – THE STRUGGLE CONTINUES

The current environment is the most challenging D&O insurance market since the dot.com bust. Securities class-action lawsuits have exposed carriers to significant new liability. As a result, the outlook for D&O insurance isn’t likely to improve any time soon.

Impact

Both public and private companies need to be more diligent than ever. The 2018 Cyan decision permits suits to be filed against companies in both federal and state court for the same event. Insurance companies are very concerned about the ongoing and future cost of these claims.

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