Commercial Property Rating When Risky Winds Blow
The process of determining commercial property involves a complex series of processes that ultimately determine the amount of premiums that will be charged to customers, based on seven factors:
- The type of coverage sought-e.g., business income, contents, building, and so on)
- Which cause of loss form is to be used-e.g., Basic, broad, special, or earthquake)
- How the building was constructed
- The occupancy of the building
- The amount of coverage that the policy is being written for
- What type, if any, of coinsurance requirement might apply
It is easy to imagine how the information above would be analyzed against the myriad types of exposures that abound to form an opinion about the risk inherent to offering insurance to a potential customer. One of those risks would be something that has been looming on the horizon, and arrived on June 1: the official start of the Atlantic hurricane season, which will continue through November 30. Weather forecasters have announced they predict a season of below-average activity, yet eyebrows are being raised in skepticism because the first tropical event of the season, officially named Tropical Storm Ana, already hit before the season had even truly gotten underway. Fortunately, the storm caused relatively little property damage and thus had minor impact; it wasn’t even classified as catastrophic event-yet who knows how much more is in store this year.
This is the month where things get interesting
In fact, June has as history of being a month in which particularly catastrophic events have occurred. Think back to as recently as June 2012, when a total of seven events took place just within the month’s 30-day period. In that short amount of time, more than a whopping $4.7 billion in claims stacked up. Nearly two thirds of that amount were attributed to two catastrophes alone-CAT 83, with losses of approximately $2 billion, and CAT 77, which racked up $1 billion in losses.
Then, there was June 2014-another month for the record books. Six catastrophes occurred then, leading to nearly $3 billion in losses and more than 370,000 claims filed. Those standout events: CAT 45, the largest with losses totaling about $1.3 billion, followed by CAT 47 which totaled $350 million in claims.
Commercial property rating will undoubtedly continue to be complicated by both the natural disasters that Mother Nature has up her sleeve and manmade situations alike, but the venerable organizations that provide the resulting data continue to apply to latest, most innovative processes and tools to determine rates in property and liability insurance for customers around the globe.