APCIA’s Gary Sullivan: Industries Can Work Together on Insurance Challenges
(Gary Sullivan, left, and Michael Flood, via Anneliese Mahoney)
NEW ORLEANS–Significant challenges affecting the insurance industry remain, said Gary Sullivan, Senior Director of Emerging Risks for the American Property Casualty Insurance Association. But, there are opportunities for the insurance and banking industries to work together to help.
Sullivan spoke with Michael Flood, MBA’s Senior Vice President of Commercial/Multifamily Policy and Member Engagement, at a session at the Mortgage Bankers Association Commercial/Multifamily Finance Servicing and Technology Conference May 21.
Sullivan listed the factors causing challenges in commercial property insurance, including rises in exposure values and replacement costs, the significant effects of climate change, the impact of reinsurance costs and man-made loss drivers.
In the commercial space specifically, factors such as increased vacancy rates in office space can also pose unique risks and challenges.
“When you have properties that are not fully occupied or vacant, water losses go undetected longer, vagrants might move in and cause fires. Claims handling is a lot more challenging,” Sullivan said. He also noted that property owners may not maintain them as thoroughly as they would if the space was occupied.
Legal system abuse is also driving some challenges in the industry. Nuclear verdicts–generally defined as a verdict in favor of the plaintiff with a damage award above $10 million–are a growing concern.
And, pricing controls and rules regarding regulation at the state level can further affect the market, Sullivan said.
Ultimately, all these factors have contributed to a disconnect between supply and demand, he said–although he noted some factors, such as reinsurance, are stabilizing a bit.
What can be done to help the situation?
“Insurers are looking to lead the way in resiliency mitigation,” Sullivan said. “We’re trying to advocate for better land-use policies and stronger business codes.” Sullivan listed working with state and federal policymakers and funding research into risk mitigation as other efforts underway.
“The insurance industry is supporting grants, we support low-interest loans,” Sullivan said. “We’d love to see fees reduced or waived for homes that go into such programs, and tax credits.”
Sullivan noted that, depending on the state, some of these concepts are more concentrated on the residential end, but there’s room for efforts on the commercial side as well.
And, there’s opportunity for collaboration across the industries, Sullivan said.
“So working together, if we can promote resiliency programs, upgraded codes. If we can work on the narrative of the legal system abuse that’s going on and be aware of regulatory issues that are detrimental to the industry, together, combined voices before the legislators and regulators [have a] tremendous impact,” Sullivan said. “And hopefully, together, we can help make a difference so that when customers of yours are trying to get closed on a property, insurance isn’t a major consideration.”
