The President’s Message: Summer 2022
So far, 2022 has not been kind to the Midwest insurance community and particularly to WRC. It’s early in July and WRC has already designated five weather catastrophes, with a sixth event that could reach CAT status. Whatever the reason, we seem to have entered a “new normal” when it comes to severe weather events. Coupled with skyrocketing home values, increased labor and material costs, supply chain delays and inflation, it’s the perfect storm (bad pun intended) for property insurers.
The increase in both severity and frequency is also causing global reinsurers to reevaluate their catastrophe models, which although never perfect, have missed the mark quite often these past few years. It’s also causing the reinsurance market to change their view of the Midwest. Previously, the middle of the country was seen as a good way to mitigate their risk exposure compared to the coastal risks (think hurricanes, wildfires and earthquakes). Now, it’s getting harder and harder to find a “safe” place to do business, which restricts the availability of capacity and raises prices everywhere.
As I mentioned above, WRC has been hit hard this year. Storm activity in April, May and June generated significant claims, and in addition to the pressure it put on our own capital, it will no doubt have an adverse impact on our reinsurance renewal for 2023. Coupled with the severe storm losses we suffered over the past few years, this is causing us to take a harder look at how we underwrite and rate for the risks we reinsure. Regardless of storm activity, I’d argue that taking a hard look at your book of business is something that should be done consistently at every level of insurance. Keeping your book healthy is the best way to ensure that when times get tough, you’ll be able to weather the turbulence. When you relax, you’re falling behind, making any recovery that much more difficult.
These themes apply to our auto business as well. 1st Auto is in the process of recalibrating our underwriting guidelines and our rating methodology to ensure that we are insuring good risks at appropriate rates. Again, we’re doing the things that should be done on an ongoing basis to make sure our underwriting appetite matches our book of business and that we keep pace with the market. We can’t change the past, but we can certainly learn from it.
As I’ve stated many times over the past several months, it’s time for us to practice what we preach. It’s often said that you can’t do anything about the weather, and that’s true. As insurance professionals, however, our job is to ensure that the things we can control, our underwriting and rating, account for the things we can’t control.