Written by: Joel Brand
With all the news surrounding inflation in the United States, consumer and business costs (as in all the costs of doing business such as taxes, wages and supplies) have increased in 2022. What else do clubs and hotels need to consider, especially as budget season is upon us? One word: insurance.
While a figurative hurricane was hitting the industry, along comes an actual hurricane named Ian. While this weather event may not have hit your area, and you may be thousands of miles away from the physical damages, why would this affect your day-to-day? As insurance is a collective of good and bad risks from several geographic areas, this will affect your club or hotel. How, what and why would it affect you? Let me explain.
The past five years (2017-2021), property insurance rates have been steadily rising due to several factors including hurricanes, wildfires, and supply chain issues increasing building costs. As these factors alone would affect rates, insured losses have also monumentally increased during this time. The latest data provided by Brown and Riding estimates the insured losses of these major events to be over $700 billion. These insured losses have caused a “hard” market for the industry. A hard market can be defined as difficult to obtain the necessary limits to ensure your buildings and increasing costs. This has affected rates and insurance renewals already the past few years, but then…
Along came Ian.
While actual insured losses have yet to be calculated, current estimates range from $50-75 billion from Ian alone. This does not include additional losses from California wildfires this past summer. As such, property insurance will become even more of an issue in 2023. Expectations of forthcoming insurance renewals should include the following: an additional increase in rate (at least 25 percent), deductible increases and capacity limits (the inability to secure enough limit for your individual hotel or club).
So, what can you do?
We recommend that you begin the renewal process early (by at least 90 days) with your broker and encourage them to obtain alternatives. In addition, meet with your current insurance carrier and underwriter to negotiate rates well before the renewal date. This will help the carrier understand what your hotel or club has done to keep your property safe from loss. During these discussions, be sure to include specific updates of repairs and/or replacements of roofs, fences, fire suppression systems, removal of brush surrounding the property, etc. The more information you can provide, the better. Now more than ever, your carrier needs to know all about you and how you maintain your property. Also, a partnership with your insurance underwriter will yield favorable renewal terms and pricing. In the past, underwriters would need to compete on price – now, it’s on terms and conditions.
The good news is that a hard market is cyclical and does end, eventually. Your focus should be on how your team maintains your club or hotel. Your ability to budget additional funds for renovations and maintenance will always be the key to your success when it comes to insurance.
Joel Brand is senior vice president at Boyd, Shackelford, Barnett & Dixon, LLC. He has over 25 years in the insurance brokerage business with a focus on hospitality, technology, temporary staffing, non-profits and other commercial insurance sectors.