3 Risk Management Actions to Prepare for 2023

    1. Conduct diligent inspections of your commercial property and the surrounding area for specific exposures to loss. [1]
    2. Analyze exposures to natural disaster. If property is located in a disaster-prone area, implement mitigation and response measures that will protect it. [2]
    3. Conduct accurate Insurance-To-Value calculations to remain fully protected when loss events occur. [3]


Natural disasters: The frequency and severity of natural disasters continue to rise. “Natural disasters cost the global economy $227 billion in 2022, with under half of those expenses ($99 billion) covered by insurers. This marks the third consecutive year in which natural disaster losses exceeded $100 billion.” [4] Extreme weather events continue to become increasingly devastating and costly. “Weather experts believe severe storms, extreme temperatures, wildfires and flooding are the new norm” due to climate risk trends. [5] “Wildfires again plagued the West Coast in 2022 and widespread drought and heat waves in the Western and Central United States depleted several reservoirs.” For the Midwest, impacts included hailstorms, a powerful derecho and “historic inland flooding caused issues throughout Kentucky and Missouri.” [6] Of course, “one of the most devastating weather events from 2022 was Hurricane Ian. Altogether, the hurricane resulted in 131 fatalities and an estimated $100 billion in total damages.” [7] The insurance industry is attempting to adopt innovative solutions to keep up with weather-related losses; weather readiness is a key area of focus.

Inflation issues: “Fluctuating demand for various building materials, and wage increases across the construction sector” were some of the root causes of inflation issues. [8] “If a loss occurs, property owners could face higher claims costs and encounter underinsurance concerns.” [9] This is why it is so important to consider Insurance-to-value calculations (ITV). Contact me at kylel@conreyins.com for a free consultation from my team. As building expenses and valuations are impacted, insureds must demonstrate increased diligence in “performing correct ITV calculations and maintaining ample commercial property coverage.” [10] “An accurate ITV calculation represents as close to an equal ratio as possible between the amount of insurance a business obtains and the estimated value of its commercial building or structure, thus ensuring adequate protection following property losses.” [11]

Reinsurance capacity concerns: “Current natural disaster and inflation trends have proven particularly difficult for the commercial property reinsurance space to navigate.” [12] As a result, “capacity will likely become further constrained in 2023, therefore impacting overall commercial property insurance rates—especially for policyholders with CAT exposures.” [13] CAT = catastrophic loss.

Supply chain struggles: “Production and delivery bottlenecks, widespread labor deficits, extreme weather events and geopolitical conflicts have contributed to a range of supply chain struggle —prompting project delays and increased recovery expenses amid property losses.”  Supply chain risk is rooted both in the economic climate and the physical climate. “Businesses may face increased claims severity if losses require them to rebuild structures or replace property on slower schedules and at higher prices.” [14]

[1] – [14]

2023 P+C Market Outlook Executive Summary – go.zywave.com. Retrieved  from https://go.zywave.com/rs/766-KGR-091/images/2023%20P_C%20Market%20Outlook.pdf