Losses running into millions following fires push up the cost of property insurance

Property insurance is becoming more expensive for companies. This is due to high losses following fires, for which insurers have had to pay out. Insurers’ earnings have also taken a hit from claims experience in general in recent years. But there’s a way out of the price trap for some commercial customers.

Fire losses running into hundreds of millions have pushed industrial property insurers into the red in recent years. Consequential loss has had a particularly negative impact. For instance, a fire at a US supplier resulted in business interruption at German carmakers. The resulting loss of profits reached levels hitherto unseen in Germany.

Negative trends in the property insurance market this year will have a range of consequences for commercial customers – depending on the sector in which they operate and the quality of their fire protection. Industries such as chemicals, recycling, wood and meat processing are on the way out as far as many insurers are concerned. The national market can no longer always offer sufficient capacity for certain businesses operating in these sectors. The missing capacity has to be bought on the international market. However, reliance on international insurers can sometimes lead to nasty surprises: international players in the market tend to have very high price expectations – even where it’s only a question of making a little capacity available to top up a customer’s cover.

However, exceptions do exist in what is a tense market environment: customers who can demonstrate that they’ve put comprehensive and effective fire protection measures in place and have professional risk management can count on price stability. This should be possible despite there being fewer market participants. The merger of insurers AXA and XL and the departure of insurers Mapfre and MS Amlin from the market mean that there is less competition this year – intensifying the trend for higher prices.