Keeping Golf Businesses on Course
Gold and country clubs face many property and liability risks that require complete insurance packages.
While the wider Management and Professional Liability market has been seeing renewals coming in flat or slightly down on the previous market, the softening of the Directors and Officers (D&O) insurance market has been much steeper.
RPS Senior Vice President Rodney Choo says that the average renewal premium is now coming in at between 20% and 30% down on the previous year's price, a continuation of a trend that started over the second half of 2022.
"This year has really been a continuation of the soft market that started last year and follows the really difficult period we went through between 2019 and 2021," he says. "By the end of 2021 everyone knew that the worst was over, so 2022 saw throughout the whole year a real acceleration of competition, and a reduction in rates across all layers for everything except the most difficult risks.
"2023 has just been a continuation of that," he adds, "and we are back to the old days where it is truly again a buyer's market."
For mature companies that have been public for a number of years, the change in premiums has been even more drastic, with some companies in that bracket seeing premiums drop by as much as 50% to 60% over the last 18 months.
"If you're a company that went public, say five years ago, maybe at a $500 million market cap, a $30 million program back then might cost you $900,000 with a $1 million to $1.5 million retention," Choo says. "Fast forward to today, and that $30 million would now cost you anywhere from $4 million to $6 million with a minimum retention of probably $10 million.
"That kind of pricing has really broken the market, and so these are large corrections that we're seeing over the last 18 months, but you're still looking at inflated pricing, and that's the ceiling was so high that there's just a lot of room to come back."
The reason for this repricing of the market has been an influx of new capacity and returning providers that saw the hard market as an opportunity to grow premiums profitability, which has led to an increase in competition and a softening of rates.
But Choo says there has been much more at play as well.
"What really supercharged things in 2022 was that companies simply weren't going public through IPOs," he says. "And so if you're a player in the market, and you're anticipating a reduction — or at least a softening — on your renewal book, the expectation or hope is that you're going to offset that with new business from new companies going public.
"That didn't happen, and so now you have markets that they're finding themselves for the first time in a bit of a hole, and that led to a little bit of desperation when it comes to pricing."
For agents, all of this means that winning new business is becoming harder, as everyone is able to offer a big reduction in the cost of a premium. To combat this, Choo says brokers need to concentrate on creating the right protection solution that makes sense for that particular business.
"Agents need to be a lot more analytical in their approach in this market, because those that are purely focused on price are going to struggle as the incumbent broker will also be able to offer similar levels of savings," he says. "Our approach at RPS is to make sure that the coverage on offer is a rational solution to the risk that is being presented.
"That's because even if you are able to offer a premium that is 40% less than the previous year, if it is an irrational solution, you're just paying 40% less for that irrationality, and that type of solution doesn't work for anyone."
Learn more about what's next for the D&O market in the RPS 2023 US Management and Professional Liability Market Outlook.