WEBVTT NOTE Optional captions are positioned at the top to avoid the original burned-in captions. 1 00:00:15.310 --> 00:00:17.560 line:10% Well, thank you guys for being here today. 2 00:00:18.230 --> 00:00:20.620 line:10% Excited about today's conversation. 3 00:00:21.270 --> 00:00:26.710 line:10% Collin Chlebak with the Virtus real estate practice that insures about 400,000 4 00:00:26.710 --> 00:00:32.430 line:10% multifamily units and 75 million square feet of office 5 00:00:32.430 --> 00:00:34.000 line:10% retail and industrial. 6 00:00:34.050 --> 00:00:39.280 line:10% Today I'm joined by three of our wholesale and placement partners. 7 00:00:39.710 --> 00:00:44.420 line:10% We have Maggie from McGill across the pond, 8 00:00:45.090 --> 00:00:49.340 line:10% Marty from RT and Craig Russell from Amwins. 9 00:00:49.350 --> 00:00:51.560 line:10% Guys, thank you for being a part of this. 10 00:00:51.670 --> 00:00:55.230 line:10% Cool. If you guys just want to give a brief intro on yourself so that people 11 00:00:55.230 --> 00:00:57.540 line:10% know who you are. Yeah. My name's Craig Russell. 12 00:00:57.870 --> 00:01:02.300 line:10% I've been a property broker with Amwins for a little over 10 years. 13 00:01:02.910 --> 00:01:07.480 line:10% We sit in the Midwest and my team really focuses on multifamily placements. 14 00:01:07.790 --> 00:01:10.800 line:10% A lot of times there's some kind of convective element there. 15 00:01:10.830 --> 00:01:13.360 line:10% So that's kind of what we're doing day in and day out. 16 00:01:13.450 --> 00:01:16.530 line:10% And that's how we started working together and built a partnership over the last 17 00:01:16.530 --> 00:01:18.980 line:10% decade. Marty McGee, RT Specialty. 18 00:01:19.610 --> 00:01:21.740 line:10% I sit here in Kansas City as well. 19 00:01:22.810 --> 00:01:28.330 line:10% And we specialize in multifamily, hospitality, frame 20 00:01:28.330 --> 00:01:29.280 line:10% construction. 21 00:01:30.350 --> 00:01:33.740 line:10% Me and my partner, Brad Moss have a team of about 15 people now. 22 00:01:33.930 --> 00:01:37.620 line:10% And yeah, I've been doing this on the wholesale side for about 13 years now. 23 00:01:38.310 --> 00:01:41.470 line:10% Awesome. And from across the pond, Maggie. 24 00:01:41.470 --> 00:01:43.540 line:10% Yeah, Maggie Luchia-Puig. 25 00:01:44.170 --> 00:01:46.840 line:10% I work at McGill and Partners. 26 00:01:47.210 --> 00:01:51.160 line:10% I have 25 years of experience in the London market. 27 00:01:51.590 --> 00:01:57.200 line:10% I joined McGill in 2019 where I lead the property placement team. 28 00:01:58.370 --> 00:02:02.580 line:10% McGill and Partners is a boutique specialist insurance broker. 29 00:02:03.810 --> 00:02:09.640 line:10% And we focused on clients with complex and, and or challenging needs. 30 00:02:10.050 --> 00:02:15.830 line:10% We work with retail brokers in the US that live to combine the domestic capacity 31 00:02:15.830 --> 00:02:19.940 line:10% with a capacity from London, European and or Bermuda markets. 32 00:02:20.410 --> 00:02:25.990 line:10% And by doing this, we allow the retail brokers, such as Virtus to create 33 00:02:25.990 --> 00:02:29.330 line:10% competitive tension between the different markets. 34 00:02:29.330 --> 00:02:34.990 line:10% And as a result, we have a proven track record of getting the broadest 35 00:02:34.990 --> 00:02:37.540 line:10% cover at the best possible price. 36 00:02:37.930 --> 00:02:39.180 line:10% Great. Well, thank you guys. 37 00:02:39.850 --> 00:02:44.950 line:10% Obviously, we've got four people on this call who all specialize in property, some 38 00:02:44.950 --> 00:02:49.950 line:10% really hard geographic footprint placements from convective storm to name 39 00:02:49.950 --> 00:02:53.560 line:10% tier one named windstorm areas. 40 00:02:54.170 --> 00:02:57.980 line:10% And you guys are all very nice people and good friends. 41 00:02:58.590 --> 00:03:04.410 line:10% So I appreciate you gracing me with your presence today and talking about 42 00:03:04.410 --> 00:03:05.440 line:10% the state of the market. 43 00:03:06.290 --> 00:03:07.240 line:10% Obviously, 44 00:03:07.630 --> 00:03:11.860 line:10% in over the past 10 years, the market has changed drastically. 45 00:03:12.230 --> 00:03:15.850 line:10% You know, when when I got in this business, it was a very soft market and 46 00:03:15.850 --> 00:03:20.470 line:10% carriers, you know, I always tell this joke that you could probably have 15 47 00:03:20.470 --> 00:03:23.780 line:10% carriers lined up ready to buy business from one another. 48 00:03:23.990 --> 00:03:26.460 line:10% That is not the case anymore. 49 00:03:27.210 --> 00:03:32.060 line:10% And, you know, our insureds being a retailer, calling on 50 00:03:33.170 --> 00:03:37.900 line:10% owners of commercial real estate, multifamily real estate and hospitality, 51 00:03:38.310 --> 00:03:41.870 line:10% our prospects are really struggling, right? 52 00:03:41.870 --> 00:03:43.390 line:10% They're kind of choking on premium. 53 00:03:43.390 --> 00:03:49.350 line:10% They've been pushed on valuations and rates year and year for past, you 54 00:03:49.350 --> 00:03:50.710 line:10% know, eight to 10 years here. 55 00:03:50.710 --> 00:03:53.140 line:10% I am excited about 2024. 56 00:03:53.910 --> 00:03:56.700 line:10% I don't think it's a night and day difference. 57 00:03:56.970 --> 00:04:01.250 line:10% But, you know, I think in some of our discussions, we've seen some of that, you 58 00:04:01.250 --> 00:04:02.740 line:10% know, the market starting to plateau. 59 00:04:03.650 --> 00:04:09.470 line:10% But I would love to hear what you guys are seeing, you know, pull out your 60 00:04:09.470 --> 00:04:13.460 line:10% crystal ball and make the prediction right now. 61 00:04:13.730 --> 00:04:16.280 line:10% Chiefs are going to Super Bowl in 2025, I'm sure. 62 00:04:17.270 --> 00:04:19.440 line:10% No, but what's going to happen this year 63 00:04:20.230 --> 00:04:21.800 line:10% in the property market? 64 00:04:22.230 --> 00:04:24.010 line:10% And are you guys excited about it? 65 00:04:24.010 --> 00:04:25.420 line:10% Craig, do you want to kick us off? 66 00:04:25.610 --> 00:04:29.560 line:10% I think plateau is a good is a good way to start. 67 00:04:30.130 --> 00:04:36.030 line:10% It seems like throughout the beginning of the year, we're still seeing increases on 68 00:04:36.030 --> 00:04:37.470 line:10% our transactional type business. 69 00:04:37.470 --> 00:04:41.620 line:10% But those increases are muted compared to what we've seen over the last few years, 70 00:04:42.190 --> 00:04:45.160 line:10% substantially more palatable to clients. 71 00:04:45.350 --> 00:04:49.710 line:10% And we've been able to offset some of those things with retention levels, but 72 00:04:49.710 --> 00:04:53.490 line:10% just pulling the levers that make sense and a balance of risk transfer versus 73 00:04:53.490 --> 00:04:58.510 line:10% premium spend. It feels like that it's going to continue throughout the year, the 74 00:04:58.510 --> 00:05:01.920 line:10% one one reinsurance, we have an idea of what that looks like now. 75 00:05:02.030 --> 00:05:04.720 line:10% But the sixth one reinsurance, assuming it follows suit. 76 00:05:05.890 --> 00:05:07.600 line:10% I think the trend will continue. 77 00:05:07.790 --> 00:05:12.790 line:10% Marty, I know, Craig mentioned some stuff about being creative and placing things a 78 00:05:12.790 --> 00:05:16.650 line:10% little differently. Would you say that you're seeing that within the first, you 79 00:05:16.650 --> 00:05:18.100 line:10% know, 50 days of the month here? 80 00:05:18.150 --> 00:05:21.790 line:10% I feel like, you know, we were trying to, we're trying to see where things were 81 00:05:21.790 --> 00:05:23.960 line:10% going in the fourth quarter of 2023. 82 00:05:24.230 --> 00:05:28.890 line:10% And, you know, we were starting to see some of this stuff where people weren't 83 00:05:28.890 --> 00:05:34.650 line:10% just pushing for the 15-20% rate increases on renewals and just trying to see if that 84 00:05:34.650 --> 00:05:39.050 line:10% was fourth quarter or not. It doesn't seem like it is now that we're a month and a 85 00:05:39.050 --> 00:05:44.950 line:10% half into the new year. I feel like plateau is the word I've been using, but I 86 00:05:44.950 --> 00:05:49.510 line:10% do feel like there's also some markets that are being aggressive trying to write 87 00:05:49.510 --> 00:05:54.170 line:10% new business, which is helping us out, create some competition 88 00:05:54.170 --> 00:06:00.070 line:10% within different layers of placements that have been historically 89 00:06:00.070 --> 00:06:02.120 line:10% problems the last three, four or five years. 90 00:06:02.290 --> 00:06:05.380 line:10% You know, the primary five, 10, the buffer layers. 91 00:06:05.470 --> 00:06:09.000 line:10% I feel like there's people coming back in willing to play in those spaces. 92 00:06:09.610 --> 00:06:14.350 line:10% There's still going to be some stuff that has, you know, really bad loss record 93 00:06:14.350 --> 00:06:19.570 line:10% that's going to, that's still going to experience the 15-20%, but I do think 94 00:06:19.570 --> 00:06:24.190 line:10% that, you know, it's getting, it's getting better. 95 00:06:24.190 --> 00:06:27.570 line:10% And, you know, there are people trying to put their foot forward and write business 96 00:06:27.570 --> 00:06:29.420 line:10% again, which is definitely positive. 97 00:06:29.750 --> 00:06:34.550 line:10% Maggie, is there anything different in the European markets 98 00:06:34.550 --> 00:06:39.260 line:10% versus what we're seeing here in the domestics? 99 00:06:39.450 --> 00:06:45.260 line:10% Yeah, very much along the lines of what Craig and Marty have just said. 100 00:06:46.190 --> 00:06:51.230 line:10% We haven't seen any new capacity coming in, but I think it's clear 101 00:06:51.230 --> 00:06:55.910 line:10% that markets are also fully aware that 102 00:06:55.910 --> 00:07:01.770 line:10% the increases have stopped, or they have 103 00:07:01.770 --> 00:07:07.770 line:10% slowed down, and therefore they're looking to write 104 00:07:07.770 --> 00:07:10.140 line:10% more if they can. 105 00:07:10.490 --> 00:07:15.930 line:10% And that in itself is creating more competition, okay, and we don't need to 106 00:07:15.930 --> 00:07:18.520 line:10% use the most expensive capacity. 107 00:07:18.870 --> 00:07:24.510 line:10% From our point of view, we always like having players that are 108 00:07:24.510 --> 00:07:30.470 line:10% consistent, that they don't come in when the market is super high and take an 109 00:07:30.470 --> 00:07:32.430 line:10% aggressive sort of position. 110 00:07:32.430 --> 00:07:38.030 line:10% We look for markets that want long-term relationships with our 111 00:07:38.030 --> 00:07:43.630 line:10% clients, and therefore we don't forget who 112 00:07:43.630 --> 00:07:49.410 line:10% gave a very hard time last renewal when we have to make decisions as 113 00:07:49.410 --> 00:07:52.420 line:10% to how the signings need to go. 114 00:07:52.510 --> 00:07:58.150 line:10% And always very much in combination to what the US 115 00:07:58.150 --> 00:08:03.530 line:10% sort of brokers want us to do and how 116 00:08:03.530 --> 00:08:06.400 line:10% they want to treat our markets. 117 00:08:06.530 --> 00:08:08.120 line:10% We don't like to be, 118 00:08:09.070 --> 00:08:14.610 line:10% to penalise clients when there's no need for that, and I think we want consistency. 119 00:08:14.610 --> 00:08:17.560 line:10% So consistency, stabilisation, 120 00:08:18.730 --> 00:08:23.320 line:10% capacity are all things that I think, creativity, but 121 00:08:24.310 --> 00:08:29.960 line:10% last year in 2023, I think when I look at what happened last year, 122 00:08:30.650 --> 00:08:34.650 line:10% Marty, I think you were one of the first people to tell me after Hurricane Ian hit 123 00:08:34.650 --> 00:08:37.980 line:10% Florida in late 2022, it was like, hey, double, double half. 124 00:08:38.690 --> 00:08:44.390 line:10% Last time I was in London, Maggie and one of her colleagues said, yeah, 23 125 00:08:44.390 --> 00:08:49.650 line:10% double, double half. I mean, that's double the rate, double the deductible and half 126 00:08:49.650 --> 00:08:52.020 line:10% the capacity, right, is what we're seeing. 127 00:08:52.410 --> 00:08:57.970 line:10% And a lot of our clients that had either big exposure to 128 00:08:57.970 --> 00:09:03.590 line:10% convective storms, our headquarters is here in Kansas City, 129 00:09:03.590 --> 00:09:06.650 line:10% right in the middle of that hail belt from Dallas originally. 130 00:09:06.650 --> 00:09:12.470 line:10% And so we've got a lot of clients up that that tornado alley, hail belt corridor 131 00:09:12.470 --> 00:09:16.860 line:10% there. We've got a lot of exposure down in the Gulf and things like that. 132 00:09:16.910 --> 00:09:22.880 line:10% And people, you know, I can say with 100% honesty that, you know, 133 00:09:23.030 --> 00:09:27.810 line:10% the tough renewals that we had last year, whether it be in tier one wind or in 134 00:09:27.810 --> 00:09:32.530 line:10% convective storm, they were the best and most creative programs that we could put 135 00:09:32.530 --> 00:09:34.560 line:10% together, but they were expensive. 136 00:09:34.650 --> 00:09:37.980 line:10% And there were more carriers because there was less capacity. 137 00:09:38.730 --> 00:09:43.500 line:10% It seems like this year is people is a little bit more encouraging, 138 00:09:44.150 --> 00:09:47.600 line:10% particularly in those tough areas. 139 00:09:48.030 --> 00:09:49.820 line:10% You know, have you guys had any success? 140 00:09:50.510 --> 00:09:51.980 line:10% Have you seen any trends? 141 00:09:52.530 --> 00:09:55.160 line:10% And how does reinsurance play into that? 142 00:09:55.370 --> 00:10:00.450 line:10% So from a London perspective, I think very much along the lines of what you're 143 00:10:00.450 --> 00:10:05.590 line:10% suggesting, calling the retentions, the market is not looking 144 00:10:05.590 --> 00:10:09.310 line:10% to take the attritional losses. 145 00:10:09.310 --> 00:10:15.210 line:10% But last year, they were pushing for very high retentions 146 00:10:15.210 --> 00:10:20.190 line:10% that would probably take away a lot of the fire 147 00:10:20.190 --> 00:10:26.130 line:10% exposures, or they would probably be looking to show a loss record 148 00:10:26.130 --> 00:10:27.880 line:10% that was clean of losses. 149 00:10:28.450 --> 00:10:34.070 line:10% Okay. Now these retentions, within reason, we are managing to get quotes excess 150 00:10:34.070 --> 00:10:39.970 line:10% of slightly lower retentions that last year, but still very much away from the 151 00:10:39.970 --> 00:10:45.730 line:10% attritional losses. I think domestically, we, the thing you hear is death by 152 00:10:45.730 --> 00:10:50.950 line:10% paper cuts, the markets got sick and getting beat up on these small water pops 153 00:10:50.950 --> 00:10:56.570 line:10% these, these, you know, two unit fires where they accumulate over the course of 154 00:10:56.570 --> 00:11:00.960 line:10% three years, and your burn rate is just not anywhere close to where it should be. 155 00:11:01.490 --> 00:11:06.870 line:10% So, you know, those retentions help offset that and can bring that bring the balance 156 00:11:06.870 --> 00:11:09.280 line:10% sheet back in order with a reasonable premium spend. 157 00:11:09.830 --> 00:11:13.370 line:10% I agree. And I think that's why you see, you know, wind/hail deductibles have 158 00:11:13.370 --> 00:11:17.270 line:10% increased over time, too, because the market, they don't want to be a 159 00:11:17.270 --> 00:11:19.880 line:10% maintenance program for replacing roofs. 160 00:11:20.230 --> 00:11:23.350 line:10% And so I do think the market is plateauing, but I don't think you're going 161 00:11:23.350 --> 00:11:26.510 line:10% to see some of the percentage wind/hail deductibles go away. 162 00:11:26.510 --> 00:11:30.890 line:10% I think they're, they're going to be here long-term now, and that's just going to be 163 00:11:30.890 --> 00:11:35.310 line:10% the reality of things. If I'm hearing everyone correctly, which I think I am, is 164 00:11:35.310 --> 00:11:40.170 line:10% that the market is plateauing, but that the exposure being pushed onto the 165 00:11:40.170 --> 00:11:43.650 line:10% carriers is staying, is also plateauing, right? 166 00:11:43.650 --> 00:11:45.910 line:10% We're not, there's no reverse trend there. 167 00:11:45.910 --> 00:11:50.810 line:10% How does the insured win? They've paid more for insurance year over year, and 168 00:11:50.810 --> 00:11:53.200 line:10% they've also retained more of that exposure. 169 00:11:53.310 --> 00:11:57.770 line:10% What are you guys seeing and what suggestions do you have, whether buy-downs 170 00:11:57.770 --> 00:11:59.960 line:10% or parametric and things like that? 171 00:12:00.050 --> 00:12:05.730 line:10% Speaking specifically to lender requirements, if an insured is okay and 172 00:12:05.730 --> 00:12:11.090 line:10% happy with the retention levels, or maybe not even happy is the right word, but on 173 00:12:11.090 --> 00:12:16.030 line:10% board with the retention levels that the markets want to see to offer the best 174 00:12:16.030 --> 00:12:18.620 line:10% balance of terms and pricing, 175 00:12:19.510 --> 00:12:24.530 line:10% I mean, deductible indemnity wording has been used more so in the last three years 176 00:12:24.530 --> 00:12:26.630 line:10% than I ever saw it before. 177 00:12:26.630 --> 00:12:31.890 line:10% If there's a balance of lenders who have specific complexes that are requiring 178 00:12:31.890 --> 00:12:33.340 line:10% different retention levels, 179 00:12:34.210 --> 00:12:38.810 line:10% you know, an aggregated deductible buyback can make sense on the right balance on the 180 00:12:38.810 --> 00:12:40.280 line:10% right size of portfolio. 181 00:12:40.590 --> 00:12:46.490 line:10% You know, on a small investor with, you know, 150 doors, that's probably not going 182 00:12:46.490 --> 00:12:52.390 line:10% to make sense, but on the right size, especially if you're just defining a 183 00:12:52.390 --> 00:12:56.590 line:10% couple of complexes that need it to satisfy a bank, that can also help solve 184 00:12:56.590 --> 00:12:59.620 line:10% the problem. I tend to agree on wind hail. 185 00:13:00.350 --> 00:13:04.600 line:10% There's definitely still some wind hail buy-downs that make sense. 186 00:13:05.790 --> 00:13:10.170 line:10% The AOP buy-downs are a lot harder to sell in the market right now, because I think 187 00:13:10.170 --> 00:13:12.240 line:10% on your first claim, you're trading dollars. 188 00:13:13.210 --> 00:13:17.510 line:10% It just doesn't make a lot of mathematical sense unless you're going to have a couple 189 00:13:17.510 --> 00:13:18.460 line:10% of claims. 190 00:13:19.110 --> 00:13:21.760 line:10% But, you know, you mentioned parametric insurance too. 191 00:13:21.770 --> 00:13:25.540 line:10% I think it became like a fun topic for everybody to talk about. 192 00:13:27.090 --> 00:13:29.850 line:10% But the take-up rate on buying it isn't very high. 193 00:13:29.850 --> 00:13:35.770 line:10% And I also think it's because it's still expensive and it's, you know, there's only 194 00:13:35.770 --> 00:13:37.180 line:10% so much limit you can buy. 195 00:13:37.490 --> 00:13:41.610 line:10% And there's also another issue that, you know, we ran into lenders that can't get 196 00:13:41.610 --> 00:13:43.350 line:10% their heads around it once you do buy it. 197 00:13:43.350 --> 00:13:45.090 line:10% So that's caused some issues too. 198 00:13:45.090 --> 00:13:48.390 line:10% They won't accept it. So I think it's interesting. 199 00:13:48.390 --> 00:13:52.350 line:10% I think it will evolve and become something hopefully more useful. 200 00:13:52.350 --> 00:13:56.370 line:10% But right now, I'd say that the take-up rate on buying it is probably less than 201 00:13:56.370 --> 00:14:02.030 line:10% 5%. We have seen more clients buying parametric, but the way they 202 00:14:02.030 --> 00:14:08.010 line:10% approach is very much to complement the property program and not to 203 00:14:08.010 --> 00:14:12.870 line:10% replace it. Maggie, you've built a lot of programs and utilized a lot of 204 00:14:12.870 --> 00:14:14.940 line:10% parametrics. You're seeing it. 205 00:14:15.050 --> 00:14:17.060 line:10% It's also a very quick payout. 206 00:14:17.130 --> 00:14:18.140 line:10% Is that correct? 207 00:14:18.850 --> 00:14:20.840 line:10% That's the beauty of it, I guess. 208 00:14:21.090 --> 00:14:25.850 line:10% That would be the benefit. And it's probably some of them, the insurance and 209 00:14:25.850 --> 00:14:28.400 line:10% lenders just can't wrap their heads around it. 210 00:14:28.510 --> 00:14:31.570 line:10% And I think that's going to change over time, but it's going to take putting it in 211 00:14:31.570 --> 00:14:37.210 line:10% front of them maybe more than once so they can start to understand it 212 00:14:37.210 --> 00:14:41.870 line:10% quite a bit better. But yeah, I agree if you're going to use it, you use it as a 213 00:14:41.870 --> 00:14:46.400 line:10% buy-down of sorts to cover some of your high-deductible exposure. 214 00:14:47.110 --> 00:14:52.210 line:10% Last week was NMHC, which is the largest multifamily 215 00:14:52.210 --> 00:14:55.800 line:10% conference in the United States. 216 00:14:56.770 --> 00:14:59.560 line:10% About 10,000 people go every year. 217 00:14:59.750 --> 00:15:01.180 line:10% In 2023, 218 00:15:01.850 --> 00:15:05.080 line:10% the conversation, there wasn't a lot of conversation. 219 00:15:05.550 --> 00:15:10.730 line:10% Interest rates were high, debt was very expensive, and people were really on the 220 00:15:10.730 --> 00:15:16.550 line:10% sidelines, the divide between what buyers could afford and 221 00:15:16.550 --> 00:15:19.540 line:10% what sellers wanted after being a very 222 00:15:21.390 --> 00:15:27.340 line:10% big market, a very transaction heavy market over the past couple of years. 223 00:15:27.930 --> 00:15:29.300 line:10% Things came to a screeching halt. 224 00:15:29.470 --> 00:15:34.490 line:10% This year, I think people, and we're already seeing more transactions, it was 225 00:15:34.490 --> 00:15:40.370 line:10% down probably 80% across all CRE from 22 to 226 00:15:40.370 --> 00:15:43.100 line:10% 23. We're seeing more transactions this year. 227 00:15:43.610 --> 00:15:46.400 line:10% Have you seen that? 228 00:15:46.550 --> 00:15:52.170 line:10% Yeah, I would say on our existing portfolios, there's a lot more movement 229 00:15:52.170 --> 00:15:56.100 line:10% both ways on acquisitions and divestitures, which would make sense. 230 00:15:56.610 --> 00:16:02.070 line:10% And then we're also seeing a ton of new construction, new 231 00:16:02.070 --> 00:16:05.020 line:10% construction added to the portfolios, 232 00:16:06.090 --> 00:16:11.700 line:10% where there's some kind of agreement with GC and complex owner. 233 00:16:12.230 --> 00:16:13.750 line:10% Yeah, I would agree too. 234 00:16:13.750 --> 00:16:17.770 line:10% We've got more builders risk right now in the pipeline for our development clients 235 00:16:17.770 --> 00:16:23.580 line:10% than we probably have in the past two years, three years almost. 236 00:16:24.190 --> 00:16:29.790 line:10% So what about, I think the trend over the past couple years, and if we rewind it 237 00:16:29.790 --> 00:16:34.940 line:10% back, 10 years ago, it was a scale ruled the world. 238 00:16:35.670 --> 00:16:37.580 line:10% Do you think we're kind of coming back to 239 00:16:39.010 --> 00:16:42.820 line:10% the marketplace where we need to put everything back together? 240 00:16:43.070 --> 00:16:48.450 line:10% I think from a sort of London international 241 00:16:48.450 --> 00:16:52.900 line:10% perspective, markets are very keen to 242 00:16:54.210 --> 00:16:55.960 line:10% remain profitable. 243 00:16:56.990 --> 00:17:00.820 line:10% I think profitability is a top priority. 244 00:17:01.450 --> 00:17:02.400 line:10% Again, 245 00:17:02.410 --> 00:17:04.900 line:10% big doesn't mean good. 246 00:17:05.410 --> 00:17:06.360 line:10% And generally, 247 00:17:07.130 --> 00:17:11.180 line:10% where are the carriers wanting to see when they're talking about a loss ratio, right, 248 00:17:11.230 --> 00:17:13.400 line:10% for our insurance here? 249 00:17:14.310 --> 00:17:19.370 line:10% Generally, that breakeven is somewhere around 50% of premium, they don't want 250 00:17:19.370 --> 00:17:22.110 line:10% losses to exceed 50%. 251 00:17:22.110 --> 00:17:28.050 line:10% No, I think it needs to be somewhere in the reach at least 70%, 75%. 252 00:17:28.050 --> 00:17:31.660 line:10% Craig, do you think that stands true domestically here as well? 253 00:17:32.170 --> 00:17:37.890 line:10% Yeah, it does. But in a very broker style answer, I 254 00:17:37.890 --> 00:17:43.810 line:10% think the truth is that there are some situations where breaking schedules 255 00:17:43.810 --> 00:17:45.280 line:10% up still makes sense. 256 00:17:45.750 --> 00:17:50.450 line:10% And that's, you know, not to toot your horn too much here, but that's where the 257 00:17:50.450 --> 00:17:54.410 line:10% benefit of working with the specialists like Virtus Real Estate Group comes into 258 00:17:54.410 --> 00:17:57.790 line:10% play, because I mean, there's no way around it. 259 00:17:57.790 --> 00:18:01.930 line:10% It's a ton of work to structure things two, three different ways and see what 260 00:18:01.930 --> 00:18:03.640 line:10% makes the most sense for the client. 261 00:18:04.330 --> 00:18:07.280 line:10% And realistically, that's what has to happen on occasion. 262 00:18:07.910 --> 00:18:12.330 line:10% Sometimes it's clear cut that, you know, we put all this together, we have a good 263 00:18:12.330 --> 00:18:15.480 line:10% loss ratio, let's build the tower, and that's bang bang. 264 00:18:16.050 --> 00:18:19.380 line:10% But sometimes you do have to bucket homogenous risks. 265 00:18:19.410 --> 00:18:24.110 line:10% And if there's certain players in the market who are aggressive on that window 266 00:18:24.110 --> 00:18:27.600 line:10% of characteristic, you have to take advantage of it. 267 00:18:27.630 --> 00:18:33.390 line:10% Well, I appreciate you tooting the horn and saying it that way. 268 00:18:33.390 --> 00:18:36.690 line:10% I know it becomes a lot more work for you guys as well, right? 269 00:18:36.690 --> 00:18:41.030 line:10% And all three of you guys in your firms waiting for us to say, well, we've got to 270 00:18:41.030 --> 00:18:45.710 line:10% look at different options. I mean, I think one of the reasons our insureds, our 271 00:18:45.710 --> 00:18:49.040 line:10% clients hire us is because we work hard, we're creative. 272 00:18:50.250 --> 00:18:56.170 line:10% And working a deal three or four different ways is more time 273 00:18:56.170 --> 00:18:59.560 line:10% consuming. It's more time consuming on our partners like you guys. 274 00:19:00.230 --> 00:19:05.680 line:10% And it generally, we're delivering the result, 275 00:19:06.410 --> 00:19:12.060 line:10% kind of not last minute, but closer to that physical renewal day. 276 00:19:12.490 --> 00:19:15.540 line:10% Marty, what are you seeing in the timelines? 277 00:19:16.290 --> 00:19:19.150 line:10% And what are your thoughts there? And I know it's frustrating for your insurance, 278 00:19:19.150 --> 00:19:21.660 line:10% and we appreciate that when things come down to the wire. 279 00:19:21.770 --> 00:19:25.680 line:10% But I feel like if we are going to work these things, 280 00:19:26.510 --> 00:19:29.680 line:10% three, four different ways to see what the best option is. 281 00:19:30.150 --> 00:19:33.780 line:10% The fact is, there's a shortage of underwriters, at least domestically. 282 00:19:33.950 --> 00:19:37.910 line:10% There's not one of our carrier partners that wouldn't tell us they could hire five 283 00:19:37.910 --> 00:19:40.260 line:10% or six new underwriters right now if we asked them. 284 00:19:41.290 --> 00:19:47.250 line:10% So you've had more business funnel into the wholesale space than ever, and 285 00:19:47.250 --> 00:19:49.610 line:10% it just takes longer to get to it. 286 00:19:49.610 --> 00:19:55.430 line:10% And I do think you just keep updating, we keep updating you, you keep updating 287 00:19:55.430 --> 00:19:57.400 line:10% your insured as the process goes along. 288 00:19:57.430 --> 00:20:02.890 line:10% But the honest answer is, if you don't wait until the last few days and 289 00:20:02.890 --> 00:20:07.710 line:10% turn over every stone, I don't think your insured is going to get the best deal they 290 00:20:07.710 --> 00:20:12.650 line:10% possibly can. So if we go ahead and bind, and we're waiting on two people that just 291 00:20:12.650 --> 00:20:18.030 line:10% don't have the time to get to something until a few days before, you may have left 292 00:20:18.030 --> 00:20:22.340 line:10% something off, you know, off the table that was worthwhile. 293 00:20:22.530 --> 00:20:28.230 line:10% So I know it's frustrating, but I also think the insured benefits from playing 294 00:20:28.230 --> 00:20:33.670 line:10% it down to the wire, because I think that way you know that you didn't leave 295 00:20:33.670 --> 00:20:37.200 line:10% something out that would have been useful. 296 00:20:38.510 --> 00:20:41.920 line:10% But I do think, you know, constantly updating is the right way to do that. 297 00:20:41.930 --> 00:20:46.110 line:10% If you're just dropping it all at the end, it's probably a little bit more 298 00:20:46.110 --> 00:20:51.010 line:10% frustrating. What are you seeing where carriers want to be or need to be from a 299 00:20:51.010 --> 00:20:55.030 line:10% valuation perspective? I think realistically, to fight for blanket 300 00:20:55.030 --> 00:20:59.910 line:10% limits, you probably need to be somewhere between 135 and 150 a square foot right 301 00:20:59.910 --> 00:21:03.710 line:10% now for frame. And honestly, we do enough new construction that we know that's 302 00:21:03.710 --> 00:21:06.420 line:10% probably even light, but just show progress. 303 00:21:06.490 --> 00:21:09.110 line:10% We know that things have historically been undervalued. 304 00:21:09.110 --> 00:21:14.650 line:10% And I've seen them in part of claims with excess markets that have thought they were 305 00:21:14.650 --> 00:21:18.780 line:10% not even going to be involved in some of these losses and they get pulled in. 306 00:21:19.030 --> 00:21:21.810 line:10% You just need to show progress is the real answer. 307 00:21:21.810 --> 00:21:27.210 line:10% Are you seeing that carriers are giving a little credit from when 308 00:21:27.210 --> 00:21:30.300 line:10% you do use a valuation that is 309 00:21:30.990 --> 00:21:35.310 line:10% more in line with the actual replacement costs as opposed to trying to undercut it? 310 00:21:35.310 --> 00:21:37.830 line:10% I mean, generally years ago, that's what everybody was doing, right? 311 00:21:37.830 --> 00:21:40.760 line:10% They were pushing down values in the soft market. 312 00:21:40.770 --> 00:21:42.670 line:10% You could push down values and you could push down rate. 313 00:21:42.670 --> 00:21:46.390 line:10% They're not doing either one right now, but are we getting some credit when we are 314 00:21:46.390 --> 00:21:48.780 line:10% going in with more realistic valuation? 315 00:21:49.350 --> 00:21:53.850 line:10% When you're brokering a deal, you're always trying to show an underwriter why 316 00:21:53.850 --> 00:21:55.540 line:10% it's best in class, right? 317 00:21:56.350 --> 00:22:01.490 line:10% And when you're showing a, we have a proactive insured who is actively 318 00:22:01.490 --> 00:22:06.330 line:10% increasing their ITVs to try and get them in line with what the market demands and 319 00:22:06.330 --> 00:22:07.600 line:10% what is accurate. 320 00:22:08.270 --> 00:22:10.220 line:10% That's the pitch to this. 321 00:22:10.490 --> 00:22:14.180 line:10% That's why this is someone you want to partner with long-term. 322 00:22:14.570 --> 00:22:19.690 line:10% Maggie, valuations were a huge part of the conversation last time I was in London 323 00:22:19.690 --> 00:22:23.900 line:10% with 20 carriers or whatnot. 324 00:22:25.150 --> 00:22:31.130 line:10% It seems like London after, if I look back, after Harvey, Irma and Maria, 325 00:22:31.130 --> 00:22:37.010 line:10% we saw London leave a lot of the hab space and say that it was unvalued and the 326 00:22:37.010 --> 00:22:38.600 line:10% rate was too low. 327 00:22:38.690 --> 00:22:42.830 line:10% And so now we're seeing this trend where the European markets are coming back into 328 00:22:42.830 --> 00:22:47.690 line:10% play. One, because I think the domestic markets have continued to push up those 329 00:22:47.690 --> 00:22:49.930 line:10% valuations and their deductibles. 330 00:22:49.930 --> 00:22:55.670 line:10% And now we're back kind of maybe more on the same page and it's easier to take some 331 00:22:55.670 --> 00:22:59.620 line:10% stuff to London and have domestic carriers sit on top of it. 332 00:22:59.630 --> 00:23:02.060 line:10% But the valuation is the same. 333 00:23:02.470 --> 00:23:06.830 line:10% The conversation is the same with your markets that it is with Marty and Craig's. 334 00:23:06.830 --> 00:23:10.080 line:10% Is that fair? Yeah, that's right. 335 00:23:10.710 --> 00:23:13.100 line:10% And I think from, 336 00:23:13.850 --> 00:23:17.120 line:10% I mean, what we try to do, I agree with Craig, 337 00:23:18.490 --> 00:23:23.640 line:10% every client, and make sure that the market treats every client by their, 338 00:23:24.070 --> 00:23:29.770 line:10% by its merits, but also to make sure that they, I mean, sometimes 339 00:23:29.770 --> 00:23:35.690 line:10% when you go with lower values, we have seen that the market penalises the 340 00:23:35.690 --> 00:23:39.160 line:10% client twice. And we also like stopping that. 341 00:23:39.170 --> 00:23:43.410 line:10% Okay. Because they load the rate because they're not comfortable with the values. 342 00:23:43.410 --> 00:23:49.290 line:10% And on top of that, they put a limit to the maximum they are 343 00:23:49.290 --> 00:23:55.130 line:10% prepared to pay. So in a way, there is, it makes more sense 344 00:23:55.130 --> 00:24:00.970 line:10% to go with what Marty suggested and show that the market, that the client 345 00:24:00.970 --> 00:24:02.380 line:10% is showing progress. 346 00:24:03.250 --> 00:24:09.150 line:10% I like the idea that we, if we end up being in 347 00:24:09.150 --> 00:24:11.980 line:10% a market where we can get some savings, 348 00:24:13.010 --> 00:24:18.450 line:10% maybe get the client to adjust the values to more real 349 00:24:18.450 --> 00:24:24.330 line:10% values and spend the money, frankly, as opposed to be underinsured 350 00:24:24.330 --> 00:24:30.050 line:10% at the top end. Do you guys have any, you know, closing thoughts or suggestions for 351 00:24:30.050 --> 00:24:34.220 line:10% insurance of what underwriters and carriers are wanting to see? 352 00:24:34.850 --> 00:24:40.460 line:10% Provide the largest amount of detail about your operation as possible. 353 00:24:40.530 --> 00:24:43.100 line:10% That's easy to understand, easy to digest. 354 00:24:43.590 --> 00:24:48.350 line:10% If they provide you with the entire file dump on everything they have, then you and 355 00:24:48.350 --> 00:24:52.390 line:10% I can work together. You and Maggie, you and Marty can work together to distill 356 00:24:52.390 --> 00:24:55.600 line:10% that down to what the markets really want to see. 357 00:24:55.970 --> 00:25:01.440 line:10% The market would like to partner with those clients that they're truly partners. 358 00:25:01.890 --> 00:25:07.670 line:10% Okay. And they treat the insurance to 359 00:25:07.670 --> 00:25:12.670 line:10% buy that catastrophic loss, but then locally, they deal with the attritional 360 00:25:12.670 --> 00:25:17.930 line:10% losses. We need to be able to convince them they are on the right track and this 361 00:25:17.930 --> 00:25:22.120 line:10% is a long-term partnership and eventually they will get there. 362 00:25:22.250 --> 00:25:26.990 line:10% Year one, they may impose those retentions that we 363 00:25:26.990 --> 00:25:32.300 line:10% talked about, but that eventually they could 364 00:25:32.710 --> 00:25:38.390 line:10% calm down. They will never take over the attritional losses, but they will be 365 00:25:38.390 --> 00:25:44.330 line:10% prepared to carry a retention that the client is 366 00:25:44.330 --> 00:25:48.920 line:10% comfortable with or financially makes sense from a risk appetite. 367 00:25:49.230 --> 00:25:54.030 line:10% Good data is key. You know, understanding the risk of a really good submission goes 368 00:25:54.030 --> 00:25:59.430 line:10% a long way with our underwriters and knowing what the expectations are, what 369 00:25:59.430 --> 00:26:01.080 line:10% the insured's comfortable with. 370 00:26:01.430 --> 00:26:04.320 line:10% But yeah, I agree with what both of them are saying. 371 00:26:04.430 --> 00:26:07.070 line:10% And right now with the amount of submissions that are coming into the 372 00:26:07.070 --> 00:26:11.440 line:10% market, having good submissions to market that have 373 00:26:13.110 --> 00:26:15.300 line:10% clear information, clear instructions, 374 00:26:16.070 --> 00:26:19.580 line:10% it puts you to the top of the stack, which is where you want to be. 375 00:26:20.290 --> 00:26:22.130 line:10% Yeah. Well, I can't agree with you guys more. 376 00:26:22.130 --> 00:26:27.270 line:10% I mean, I think a lot of the success that we've seen, you know, is 377 00:26:27.270 --> 00:26:31.200 line:10% getting good information and data, right? 378 00:26:31.270 --> 00:26:35.460 line:10% It's telling the story of what the insureds have done. 379 00:26:35.630 --> 00:26:37.660 line:10% Yes, there was a fire at this location. 380 00:26:37.950 --> 00:26:41.120 line:10% Because of that, we're willing to take a higher deductible. 381 00:26:41.250 --> 00:26:46.990 line:10% We've also spent X amount of funds, capital expenditures on trying 382 00:26:46.990 --> 00:26:50.700 line:10% to make that a safer and prevent future losses. 383 00:26:51.150 --> 00:26:56.310 line:10% Thank you guys for the hard work and giving our insureds and our clients, you 384 00:26:56.310 --> 00:26:58.440 line:10% know, multiple avenues to consider. 385 00:26:58.590 --> 00:27:01.000 line:10% I mean, I think that's at the end of the day, right? 386 00:27:01.490 --> 00:27:04.420 line:10% Over-communicating, being transparent with our partners, 387 00:27:05.090 --> 00:27:07.320 line:10% whether on a client or a wholesale or carrier, 388 00:27:08.170 --> 00:27:12.160 line:10% and then giving optionality is how you win in a hard market. 389 00:27:13.170 --> 00:27:15.580 line:10% So thank you guys for all the hard work you've done. 390 00:27:15.590 --> 00:27:20.380 line:10% And thank you for spending an hour with me and placating me here. 391 00:27:22.130 --> 00:27:23.350 line:10% Sharing some of your knowledge.