Insurance
The Forest Products Insurance Marketplace in 2015
by Anthony Robin Little
BB&T Insurance National Forest Products Practice
The owner of a large sawmill called the other day with a problem. In spite of no losses over the last four years, his combined property and liability premium had nearly doubled. With an expiration date only days away, he felt out of time and alternatives. Unfortunately, we hear this same story all too often.
The heavy forest products manufacturing insurance marketplace has shifted, but there's good news. You do have options. Partnering with an insurance broker that has a finger on the pulse of new opportunities is essential.
What's happening in the forest products manufacturing insurance marketplace?
Historically, a small group of insurance carriers specialized in writing policies for the forest products industry. The accounts stayed put, or moved within this group of specialty carriers. It has been clearly communicated that many of the specialty markets were hit hard with very large losses, mostly property losses resulting from fire. As a result:
- Insurance carrier profitability went down.
- Re-insurance costs skyrocketed.
- Carriers re-evaluated the conditions for participation in the forest products manufacturing niche.
These factors are driving the recent insurance pricing correction for many sawmills and other heavy manufacturers. Some carriers have invoked strict limitations, or have left the forest products manufacturers marketplace.
The property loss issues impacting insurance costs for the heavy forest products manufacturing segment are unique and differ from conditions within the general insurance market population, which remains a bit soft. Like the example above, many operators are being blindsided by huge renewals, reductions in coverage, and in some cases non-renewals.
There is good news to report!
Several new programs in the standard, as well as excess and surplus marketplaces, have recently been announced. And there are new carriers planning to enter the forest products niche, who should provide needed options and competition for the heavy manufacturing space.
If you are considering a move away from the standard insurance marketplace, you may find some variation in the terms and conditions, when compared to what you received in the past. These changes may significantly increase the amount of assets a manufacturer has at risk. Evaluate your risk threshold. Ask your agent or broker to explain the pros and cons of terms being offered by any insurance program, before accepting the proposed offer of coverage.
Common coverage structures you may encounter:
- Admitted and non-admitted insurance carriers
- Multiple carriers quota sharing the risk
- Layering coverage with multiple carriers to reach required coverage limits
- Location loss limits
- Increased self-insurance
- Higher deductibles
What's the bottom line?
Changing dynamics in the insurance marketplace are out of our control. Your individual loss experience, exposures, safety policies, and maintenance procedures will ultimately determine where you will fit in today's marketplace. To get the best the marketplace has to offer, start working with your broker early. Provide complete and accurate information so the broker can share your individual story with underwriters.
Working with brokers that understand the industry is essential. Brokers that are not familiar with our niche are often caught by surprise when they get the renewal offer or non-renewal notice, leaving little time to seek other options. But you do have options!
BB&T is the fifth largest independent insurance provider in the nation. Anthony R. "Robin" Little, CIC, Vice President with BB&T Insurance Services and Director of BB&T Insurance Services-National Forest Products Practice, can be reached at ARLittle@BBandT.com, (252) 752-2824 or find Robin on LinkedIn or Twitter @Roblit59.
