Mind the G.A.P: Controlling Costs in a Changing Property Market

By Scott Moore, Managing Director and Warren Keyes, Senior Vice President, U.S. Property Practice

Today’s property insurance marketplace is in transition and may seem challenging to insureds preparing to renew their property programs. Recent natural catastrophes like earthquakes, floods, and tornadoes have caused many to wonder if rate increases and coverage restrictions will follow.

What can be done to mitigate these potential increases and restrictions? Some might suggest a shot gun marketing of a placement to every possible insurer. Others might say that you cannot fight the market trend and rate increases are probably inevitable.

At Marsh we believe there are alternatives. Companies can control their property insurance costs by being prepared and following these suggestions.

Raise your IQ. Make use of all available analytical tools to set program parameters and customize a program that meets your current risk transfer needs. Analysis from Marsh’s Global Benchmarking Portal is available to all clients and is designed to help you compare key features in your program with those same elements in placements of peer companies. Additionally, our brokers are dedicated property experts and can assist you in analyzing loss history, annual average loss (AAL), and maximum foreseeable loss (MFL) calculations. For example, we can provide assistance to:


  • tailor deductibles based on loss history analysis and peer benchmarking in order to avoid dollar trading because deductibles may be too low and
  • set limits after considering loss modeling and MFL calculations thereby purchasing adequate but not excessive coverage.


No COPE, no hope. Underwriting decisions are driven in part by computer hazard modeling; therefore, complete exposure information is essential. Without complete data, loss models default to the worst possible assumptions, and coverage restrictions and higher rates result. Accurate and complete information yields better modeling results with less volatility or vulnerability than models run with incomplete or inaccurate data. With thorough data, underwriters will charge premiums more in line with your actual risks rather than perceived exposures. COPE data includes:


  • Construction: walls, floors, roof, fire divisions, year built
  • Occupancy: owned, leased, other occupants
  • Protection: water supply, sprinklers, smoke detection, watchman service
  • Exposure: neighboring buildings, fuel tanks, flood, earthquake or wind zones


An ounce of prevention is worth a pound of premium. Underwriters typically respond well when insureds demonstrate a commitment to loss control. During renewal meetings:


  • Summarize risk improvement actions taken over the past year and the costs of completing associated capital projects.
  • Benchmark human safety results and show a correlation between work place safety and property loss prevention.
  • Communicate corporate executives’ commitment to safety and loss control.
  • Outline loss control improvement projects planned for the coming year, the capital expense budgeted, and the effect the improvements will have on loss potential.
  • Review locations to be inspected in the coming year and the overall inspection frequency in order to maximize the impact of capital expenditures.
  • Include your director of loss prevention in renewal discussions with underwriters.
  • Provide an overview of the business continuity plan and supply chain management.

Clean house. Delete or minimize unneeded coverages to reduce cost. Focus on areas where insurers can reduce reinsurance costs. Examples of areas to cut back can include the catastrophe perils of flood, windstorm, and earthquake. The capacity for these perils is a commodity to insurers, and they charge significant premiums to offer these coverages.

Consider reducing the overall policy limit. There may be only modest cost reduction for this change from an incumbent insurer. However, this change often creates more competition from other carriers since less capacity is needed. This second cost savings dynamic often is often overlooked.

Work closely with your broker to determine policy limits, deductibles, and terms and conditions needed to ensure appropriate protection for your company.

Make the world your oyster. Use the worldwide marketplace to create competition and seek potential market alternatives. Solicit proposals from key insurance centers outside the United States, including Bermuda, London, and Zurich. It is not uncommon to see upwards of 30 percent of our large property program’s capacity be sourced from outside the United States.

Meet and greet. One of the most effective strategies a company can employ during the renewal process is to conduct face-to-face meetings with underwriters. Strong underwriter relationships may not eliminate market swings, but they may have a mitigating effect. Lloyd’s underwriters often say they are more receptive to insureds in a hardening market who have stayed with them throughout the soft market.

Be prepared with a comprehensive but brief presentation that showcases your company and your carefully crafted renewal strategy. Consider entertaining meetings with both incumbent insurers and potential new carriers to nurture existing relationships and develop prospective relationships as well.


Mind the Gap

A rider on the London Underground hears “Mind the Gap” as the train arrives at the station. This safety reminder also serves as a good summary for getting the best outcome in a changing property market.

Globalize Access the worldwide market

Analyze – Complete a full technical review

Personalize – Differentiate your risk

Marsh’s Property Practice is available to help our clients and prospects avoid unexpected budget impacts and put and end to laissez-faire market approaches. For fresh ideas on how to control costs, please contact your local Marsh representative or a member of our dedicated property team.