How to Be Prepared in a Hardening Insurance Market | JGS Insurance 

How to Be Prepared in a Hardening Insurance Market

By Colleen Harless, CISR, ACSR, CICSenior Account Manager  

In the casualty and property insurance industry, price, conditions, and terms as well as the availability of coverage are all impacted by fluctuations between soft and hard markets. Until four years ago, the insurance market had been considered relatively soft, but over the last four years, we’re seeing a consistently hardening market.

During a soft market, competition can be intense, and premiums are either stable or declining. In a hard insurance market, which is the upswing in a cycle when insurance premium rates are escalating, insurers are not inclined to negotiate terms. Underwriting standards tend to tighten, and insurers closely monitor insurance rates and manage coverage capacity.

According to the third quarter CIAB report from 2021:

  • Premiums increased for the 16th consecutive quarter, with respondents reporting an average premium increase across all account sizes of 8.9%.
  • Prices increased for all lines of business, save for Workers’ Compensation. After five quarters of slight increases for Workers’ Compensation, premiums began to decrease once again, at -0.3%.
  • Cyber once again had a record increase, the highest premium increase out of all other lines.
  • Respondents agreed that the prevalence of cyberattacks—specifically ransomware, phishing, and social engineering attacks—was one of the primary drivers of Cyber premium increases.
  • Reported changes in underwriting were consistent with reported hard market conditions …[with] more disciplined underwriting, stricter loss controls, and more in-depth reviews of loss history.

One contributing factor to the current climate is that the cost of lumber and steel have increased significantly over the past two years. The National Association of Home Builders (NAHB) advised surges in construction costs are linked to rising building material expenses, particularly lumber.


Other issues causing a perfect storm to drive prices higher include:


These increases are partially linked to the COVID-19 pandemic. Many lumber mills closed in the spring of 2020 due to stay-at-home and social distancing orders. Some mills never reopened, and many of the mills that kept operating did so at a limited capacity. Due to their complex computer operations, it can take up to two years to build a new mill and get it operational. This resulted in a decreased supply of lumber for the housing industry, and the operating capacity does not yet appear to be back up to pre-2020 levels.

Low Interest Rates

Historically low interest rates contributed to an increase in home purchases and home renovation projects. With more people working from home over the past two years, a higher-than-average number of people started investing in home improvement projects. This resulted in an increased demand for building materials.

Labor Shortages

Current labor shortages throughout the supply chain are making it difficult to keep up with demand. Fewer workers in the mills means the timber isn’t being cut and processed as quickly. Fewer truck drivers makes it more difficult to transport the lumber.

Gas Prices

Increased gas prices make it more costly to transport materials, thus increasing the final cost of those materials.


The American market receives more than a quarter of its lumber from Canadian lumber mills. Severe storms in late 2021 and early 2022 have caused flooding in Canada, which is disrupting the supply chain. Canada is also struggling with a beetle infestation, which is killing some softwood trees, making them unusable for construction.

In addition, on November 24, 2021, the United States more than doubled the tariffs on Canadian softwood imports, bringing them up to 17.99%, making it more costly to import lumber from our northern neighbor.

Increased Catastrophic Losses

The demand for building materials and labor has also increased due to the increased number and severity of catastrophic events over the years. According to the Insurance Information Institute, there were 97 natural catastrophic events in the United States in 2021, 9% above the 2020 losses and more than double the 2019 losses.

A fatality of the hardening market is the concept of “grandfathering” certain risks that were not an underwriting concern when the carrier first wrote an account. Some carriers are starting to crack down on things that weren’t an issue when they first wrote the account but now would disqualify the account from receiving a new business quote in their program.

When the market begins to harden, it is critically important to have a strong insurance broker on your side. They will be able to help you to assess appropriate coverage levels for your business, review claims history, identify optimal carrier partnerships, and implement risk management and training programs.


Here are some of the general services we offer to help our insureds stay educated and prepared:

  • Loss run and claim review: to determine trends that can be corrected
  • On-site inspection: to determine risk management suggestions that could help protect the Insured from preventable losses
  • Property value determination: to plan for an increase in a building’s replacement costs at renewal
  • Hazard analysis: to identify what types of hazards the community is exposed to
  • Pre-renewal strategy meeting: to discuss changes the Insured may want to make to their policy at the next renewal
  • Governing document review: to determine if any recommendations can be made to help protect the Association’s future insurability. Common examples of recommended amendments are:
    • Limiting the number of units that can be tenant occupied
    • Implementing Tort Immunity (New Jersey only) to protect against unit owners suing in the absence of gross negligence
    • Passing a Deductible Resolution to clarify who is responsible for the Association’s property deductible in the event of a claim
    • Requiring burst-resistant washing machine hoses
    • Requiring regular dryer vent and chimney inspections
    • Requiring regular water heater inspections
  • Vendor contract review: to make sure the appropriate risk transfer is in place in the contracts; to pull the vendor’s insurance carrier into any claims arising from the vendor’s work or lack thereof
  • Policy coverage review: to identify where additional coverages may be needed to fill in gaps (like earthquake, flood, or cyber liability).

The most important thing to remember is to stay informed so you will be prepared to budget accordingly.


Have questions about insurance coverage? We’re here to help, contact us today!.