A Carrier Management article, from July 17, 2023, covered a report by McKinsey Global Institute that $800 billion of value has been lost specific to office building values attributable to work from home, post-pandemic employment trends. For context, $800 billion is about 80% of surplus as all U.S. insurance companies have, combined, as of 12-31-22 ($1 trillion).
This has multiple implications for insurance. The first is, if you insure office buildings, you may need to find some new clients. Also, depending on the nature of your clients, expect some fires. Maybe fire those clients prior to them burning down your loss ratios and contingencies.
Second, loss trends will materially change. It's speculative to think we can predict how losses will change but workers' comp will for sure, maybe for the better and maybe for the worst. Auto loss trends likely will show less frequency and more severity (and always, always remember to not drink the Kool-Aid about severity being the end of the world because if frequency decreases, severity will always increase so severity should be increasing). Many homeowners need additional coverage working from home, but without the coverage, loss trends won’t affect homeowners loss ratios.
Another loss trend likely to increase is associated with professional liability. Virtual training is inadequately effective, and some trends already indicate a material increase in frequency specific to professional liability.
Cyber is another line likely to see an increase in frequency, and maybe severity. Work at home is simply not as secure for many firms.
Getting in front of these trends is a great opportunity. Proactive is better than reactive.
My third point might be a stretch, but I like to find the silver lining. Given how hard the property market is, fewer offices should free up some surplus, provided the offices are not insured at the time they burn.
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