Background
Over the past five years, property insurance companies have faced significant challenges in maintaining profitability. A surge in catastrophic claims, changing weather patterns, and rising temperatures have contributed to this crisis. Factors such as the increasing severity of claims, dramatic rise in material costs, and historical underinsurance have compounded the problem. Additionally, there has been a startling rise in the number of billion-dollar disasters. These issues have forced insurance companies to implement rate increases, reduce coverage limits, and modify terms and conditions. The situation reached a breaking point with the devastating Hurricane Ian and subsequent winter storm of 2023. We are now in the midst of the worst property insurance market the industry has ever seen.
The Changing Landscape
The current state of the property insurance market demands a shift in the way insurance is approached. Insurers are being forced to move away from acting as quasi-warranty replacement policies and focus more on covering larger or catastrophic claims. Property owners must prepare for higher property deductibles and invest in building modifications and maintenance measures that reduce potential weather damage and the extent of damage. The industry is refining its underwriting strategies for risks such as tornadoes, wind, hurricanes, floods, wildfires, hailstorms, and freezes. Predictive modeling is getting more sophisticated and accurate, enabling insurers to better assess risk based on big data, the increasing speed of climate change, and subsequent specific locations prone to particular risks.
The crisis is not isolated to a single insurance company but is affecting the entire industry. The reinsurance market, heavily impacted by Hurricane Ian, is facing a day of reckoning. Rate increases and adjustments to coverage limits, deductibles, exclusions, and limitations have become prevalent. This situation poses challenges for insurance providers and agents, as many markets have declined coverage due to a concentration of residential frame housing values, as we already seeing in Florida and California.
Facing the Current Situation
MJ Sorority has shielded clients from market volatility in the past (see graphic) but now is being forced to address the evolving landscape. The insurance provider for the MJ Sorority Program, Travelers Insurance Company, informed us that they would be addressing conditions, rates, and deductibles upon each clientâs renewal. Travelers’ actions are indicative of industry-wide changes that require careful consideration. Rest assured that unlike what weâre seeing in the homeownersâ markets[1], capacity and coverage are not at risk.
Conclusion
The property insurance market is facing unprecedented challenges due to an array of factors. Insurers and insureds alike must adapt to the evolving landscape by embracing a new business model that emphasizes coverage for larger or catastrophic claims. Increased property deductibles, building modifications, and refined underwriting practices are crucial steps. The industry’s focus on predictive modeling and big data can help allocate risk more effectively. MJ Sorority understands the difficulties posed by the crisis, and we are dedicated to enhancing risk management advice and resources, particularly regarding wind and hail perils, both at the headquarters level and among local housing volunteers.
By working together, insurers and insureds can navigate the perfect storm and ensure continued protection against unforeseen property losses. Please do not hesitate to reach out to your Client Executive with questions and concerns.
[1] For further reading about the insurance market, refer to the links embedded in the document above or review the following links fur further reading:
- Allstate Stops Selling New Home-Insurance Policies in California, Citing Wildfire Risks, Wall Street Journal, June 5, 2023.
- Insurers Fleeing California Market Want Rate-Hike Flexibility, Bloomberg Law News, June 14, 2023.
- America’s growing hurricane wind problem, Axios, February 27, 2023.
- Floridaâs hurricane danger: Itâs not the wind, itâs the water, Tampa Bay Times, June 6, 2023.
- Why Is Homeowners Insurance In Florida Such A Disaster?, Forbes, April 11, 2023.
- Property Insurance Market âHardest in a Generationâ, Claims Journal, March 28, 2023.
- Several factors pushing property insurance prices higher, Business Insurance, June 9, 2023.
This edition of the MJ Sorority newsletter covers the following topics: property market insurance update, back to school risk management resources, 2024 economic outlook, FAQs, and more.
National fraternities and sororities have been dealing with changing circumstances on many fronts over the
last five years. Part of this changing landscape involves property management and adapting to significant
increases in property claims across the nation. As a result, property owners must prepare for higher property deductibles, due to the increase in the frequency of claims and in the increase in the severity (cost) of claims than in years past.
It is critical to an organizationâs sustainability to have adequate short-term cash reserves and liquidity resources
for operational flexibility and for ensuring that organizational commitments are met timely. Beyond short-term cash reserves, fraternities and sororities should also consider building reserves to fund insurance
deductibles as claims are incurred. Such reserves (often designated by the Board of Directors) are funded so
that intermittent claims can be managed without disrupting already tight operating budgets.
In considering building an insurance reserve fund, organizations should consider the following areas:
- Understanding the risk landscape (past, present, and future) – collaboration with an organizationâs current insurance provider and property managers or housing team members can aid in understanding what claims have been incurred, properties at risk for issues now, and what deferred maintenance issues might be present in the future. Understanding risks by geographic location as it relates to weather and catastrophic events is also helpful in determining how much to reserve and how sustainable that reserve will be over time. If you are unsure of your house corporationâs loss experience, contact your Client Executive at MJ Sorority.
- Starting a reserve fund â organizations can formally designate funds (through Board resolution) to function as an insurance reserve that cannot be spent on other purposes. This can formally separate these funds from operating cash and other financial assets and keep reporting and tracking of these funds segregated within the organizationâs financial statements. Organizations can also fund a new reserve by designating surplus dollars annually be deposited into an insurance reserve. Creating a one-time assessment charged to members, or charging a new annual fee are also options to establish a reserve fund or continue to fund reserves.
- Investing your reserve fund â organizations need to consider where reserve funds will be housed and how they will be invested. Organizations should consider a separate investment policy statement for reserve funds. Keeping reserves in short-term insured bank accounts allows for some return on those funds without taking on market risk. Certificates of deposit or sweep accounts can also be used if they do not lock up all funds for specified periods of time. Depending on the size of the reserve, it might make sense to invest in longer-term opportunities to increase investment return. In all cases, liquid cash will need to be accessible to some degree for those claim deductibles should they occur.
- Drawing from your reserve fund â organizations also need to consider how to spend from reserve funds. A policy on spending should be established and should include what constitutes an approved expense, how often reserves can be drawn upon, and what approvals are needed to draw (approvals usually involve Board or Finance Committee approval). Determining a minimum threshold that must be left in the reserve at all times should also be considered.
Blue & Co.âs Not-for-Profit Services Team advises organizations on ways to improve both the balances and the utilization of reserves and liquidity resources to enhance sustainability over time. Please reach out to your local Blue & Co. advisor with any questions regarding these recommendations.
Thanks to our partners at Blue & Co. for this resource.
This edition of the MJ Sorority newsletter covers the following topics: property market insurance update, summer risk management resources, reviewing contract basics, and more.
This edition of the monthly MJ Sorority newsletter covers the following topics: building projects, summer closing checklist, chapter house self-inspection form, sprinkler system update, Housing Forum replay with Marlon Gibson, PhD, cybersecurity webinar, what to look for when reviewing a contract FAQ, and more.
This edition of the monthly MJ Sorority newsletter covers the following topics: spring weather resources, important update about sprinkler credit, risky activities, Housing Forum session from Dr. Marlon Gibson, mental heath webinar, FAQ about workers’ compensation, and more.
This edition of the monthly MJ Sorority newsletter covers the following topics: highlights from the 2023 MJ Housing Forum, risk management advice for hail season, cybersecurity prevention, FAQ about passenger vans, and more.
This edition of the monthly MJ Sorority newsletter covers the following topics: winter storm update, winter driving tips, FAQ about volunteer’s insurance recommendations, preventing frozen pipes, preventing slips and falls.
As you enter the summer months there are several things that should be done to ensure the property is protected while vacant:
| Completed | Closing Task |
|---|---|
| Make sure preparations for any summer projects have been completed and a plan of action is in place. | |
| Check all rooms and areas of the house to determine if security deposits should be returned or kept to pay for damages. You should refer to the move-in form you used at the start of the year. You should have the tenant sign the form on move-out also. | |
| Clean all areas of the house and make sure all food has been removed or properly stored. Be sure all trash is removed from the property. | |
| All hallways should be cleared of debris, clutter, and\or furniture and all fire doors must be closed. | |
| Thermostats should be set to appropriate levels and hot water heater should set to âpilotâ position, but not turned off. The boiler pump switches should be turned off for the summer. Unplug all appliances, open refrigerators and freezers and empty ice makers if they are unplugged. | |
| Secure and\or store all awards, composites, trophies, and any other valuables. | |
| The outside of the house should be cleaned, including making sure the gutters are clear (we would recommend a professional who is properly insured). Be especially aware of any combustibles that may be stored against the exterior of the house. This should be properly disposed of. | |
| Check interior and exterior lighting and all external doors to ensure proper security of the property and set any lighting timers to dusk to dawn setting. | |
| Ensure that all broken windows have been repaired and are locked and blinds\drapes are closed. | |
| All shrubbery should be trimmed to prevent easy hiding by anyone who may try to break in to the property. The landscaping should be properly maintained during the summer months. | |
| The university police and/or local police should be notified whether anyone should be or will be at the property during the summer. Ask them to patrol regularly if possible. | |
| An alumnus or responsible other party should have a key to access the facility if needed and check on the property at least weekly. Remember to disable resident, chapter membersâ, and employee key\swipe access and\or collect all keys from them. House corporation representative and\or house director, if applicable, should be the last people to leave the house. | |
| Discontinue all services not needed during break, including mail, newspapers, food deliveries, garbage, etc. | |
| Create and distribute list to house corporation members, chapter leadership, house director, if applicable, and headquarters contact the names and contact information for house corporation and chapter leadership, all staff members, important vendors and service providers, and appropriate emergency phone numbers. |
Thanks to our business partner, CSL Management, for this resource.
Note: you can easily print this resource to use at your chapter house by clicking printer icon to the right of the resource title at the top of this page.
Our annual winter weather bulletin with risk management considerations and resources.
This edition of the monthly MJ Sorority newsletter covers the following topics: flu season preparedness, embezzlement risk management and claims trends, string lights FAQ, and preventing kitchen fires.
The NPC community is working very hard to ensure that their organization represents diverse membership. An important dimension of this effort is the question of whether your chapter house is accessible to members and guests with a disability, be it a physical or a mental condition.
We have heard from several clients who expressed an interested in an accessibility audit, in which their chapter houses could be inspected to see where the facility could be made more accessible.
One question that has arisen is regarding doing the audit for a location and what liability may be created by doing an audit and not addressing the deficiencies identified for accessibility. This question, first off, needs to examine what liability in fact is being imposed upon sorority chapter houses, if any. The natural assumption is that disability accessibility is imposed through the Americans with Disability Acts (ADA). Please review our resource on this topic that illustrates that the ADA does not apply to fraternal organizations (aka sorority chapter housing).
However, there may be some local municipalities that have imposed similar ADA-like regulations which may or may not apply to the sorority chapter houses.
Therefore, with the lack of any applicable regulation(s) there is no liability imposed on the sorority chapter house. In the absence of any liability, if an accessibility audit is completed and for whatever reason any or none of the recommendations are not addressed, there is virtually little or no threat to your organization or the chapter house.
We do believe that there could be liability if there are promises made to a specific member or prospective member for a condition to be addressed, and the chapter ends up being unable to do so, which could potentially result in a contractual liability claim (also referred to as breach of contract).
Should you have additional questions or concerns regarding this subject, feel free to contact your Client Executive.