A Casualty Insurance Perspective on the Habitational Market

Insuring commercial residential buildings such as apartments, condominiums and multi-family complexes used to be fairly straightforward, and the market for Habitational coverage reflected that fact. Most claims were of the trip-and-fall-variety, capacity was widely available, and over the years, Habitational became one of the cornerstone lines in Casualty. After all, Habitational is a $22 billion segment* that represents 7% of the $300 billion+ commercial lines market.

But those days are over, as Habitational has become a challenging class due to new types of risk, broader claims and an overall lack of capacity. The rise in everything from assault and battery claims, to habitability claims, to human trafficking claims and more means the Habitational sector continues to be a challenge for insurers, and it's getting worse.

"From a habitability standpoint, we're starting to see claims in new places," says Adam Mazan, RPS area president, Southern California. "You're seeing more and more issues pop up across the entire Habitational line of business versus what it was years ago when it was predominantly slip-and-fall-exposure."

Now, not only are the costs of standard slip-and-fall-claims increasing, but carriers are now facing claims associated with violent crimes and more, which is making the market more challenging for agents than it had been in the past.

And claims are starting to pop up nationwide.While Habitational claims were traditionally more common in California, insurers are starting to see increasing claims in Texas, Georgia and Florida. Georgia in particular has become a real challenge due to assault-and-battery claims in recent years.

This change is playing out in rates and coverages as well. As recently as 2020, the rate per door for many Habitational policies averaged between $40 and $50. Today it's closer to $100 a door. So, not only do clients in Habitational have broader exposures from all the units under their policies, they're also facing higher rates per unit, and those rates often come with more restrictive terms than just a few years ago.

As a result, the market is tightening up, particularly for policies of less than $10 million. Given the rising prevalence — and associated cost — of claims these days, fewer insurers are willing to step up and participate in the Habitational market as of 2023, putting pressure on everyone from building owners to operators to agents.

"I worked on one Habitational renewal recently where there were only five general liability markets willing to entertain it," says Bill Wilkinson, president, RPS National Casualty Brokerage. "Two of them had been on it in the past and didn't want any part of it, so I was basically down to three markets. The carrier that's on it now that we renewed with is looking to get out next year, which will leave us with one or two. There's nothing available in the London marketplace, so many of us are still trying to find solutions for this type of business."

Learn more about what's next for the Casualty market in the RPS 2023 US Casualty Market Outlook.