The continuing effects of COVID-19 dominated the hospitality industry over the last several years and these challenges have also had a major impact on risk management and insurance. Owners and operators of bars, restaurants, hotels, and associated businesses can become more resilient through vigilant risk management. The steps taken to mitigate risks, especially against new challenges and exposures that have arisen during the pandemic, will greatly influence their insurance premiums and coverage availability throughout 2022 and beyond.
The current state of this hard insurance market requires hospitality businesses to present themselves in the best possible light to enable their brokers to present the best-case scenario to insurers. This means that in partnership with your insurance advisor, demonstrate to the marketplace why they should want your business (i.e., a good loss history and corrective measures taken to prevent similar losses from reoccurring, proactive risk management/transfer practices, proper safety protocols, and property upgrades.)
In layman’s terms, a “hard insurance market” is the upswing in a market cycle when insurance premium rates are escalating, and insurers are disinclined to negotiate terms. Underwriting standards tighten and insurers closely monitor insurance rates and manage coverage capacity. Through the remainder of 2021 and beyond, insurance buyers will continue to feel the effects of the hard market in the hospitality industry.
Underwriting losses, poor industry results, decline in investment income due to lower interest rates, an increase in natural disaster claims, social factors, such as “social inflation” of claims and ‘once-in-a-century events such as COVID-19, are all factors directly contribute to the state of the market.
On the property insurance side, water damage and catastrophic weather events have been costly for insurers while on the liability side, increasing claims for slips and falls, have led to expensive lawsuits. Some companies have stopped offering hospitality insurance, exiting the space, and resulting in fewer players in the market. The economic fallout from the global pandemic includes lower interest rates, pushing premiums higher yet again as insurers can’t rely on investment behind the scenes to remain profitable. Additionally, concern relating to COVID-19 related liability claims is tightening the market even further.
So, what can hospitality businesses do?
Within such an environment, underwriters carefully review submissions, questioning and reviewing every detail of information on the application. Together, with your insurance broker, work towards a professional submission that highlights the strengths of your risk management efforts.
Completing an insurance review and gathering information takes time. Here is what you can do to improve your situation in this hard market:
- Be Proactive: Providing your updated information to your broker early in the renewal process will allow you to obtain your renewal terms sooner and address options with your broker.
- Be Complete: Insurance underwriters have limited time to go back and forth with your broker requesting missing information – assist by ensuring your file is complete.
- Be Current: Improve maintenance, implement Risk Services recommendations, undergo an operational evaluation – underwriters favor and value clients that take care of their business.
These are just some of the ways you can get ahead of rising premium costs and navigate the current state of the insurance market. Now more than ever, it is imperative to work with your insurance advisor to review your coverages and to understand what your P&C policies cover, what they don’t and the best ways to mitigate the individual and unique risks of your properties.