November 2023

We Have Been Here Before… Kind of By Robert A. Travis, CIRMS, CPIA, EBP, Long Beach Commons Condominium Association, Inc.

T he Insurance Risk Management Institute defines an insurance hard market as an “upswing in an insur ance market cycle when premiums increase, and capacity for most types of Insurance decreases.” There is no doubt that we are currently in the middle of a hard market and, for many of our community association prac titioners, including insurance professionals, this is their first “hard market experience.” Many individuals have had little to no experience of being thrust into a hard market and eventually moving on after the hard market ends. Therefore, being in the middle of your first hard market is admittedly intimidating. As someone who is now experiencing their third hard market, I have been asked to provide some his torical perspective on this very unpopular insurance market cycle and how we worked our way out of it in the past. My first hard market experience was from 1985 through 1988. This hard market was almost entirely caused by a crisis in tort liability, as significant liability lawsuits almost collapsed the insurance industry. The main problem areas for the insurance industry were in the areas of medical malpractice, professional lability, products liability, and completed operations liability. It seems that all hard markets are accentuated by a singular event that exposes the insurance industry’s inability to drive a profit. In the 1980s, this event was the Hyatt Regency walkways collapse in

1981, which killed 114 people and injured another 216. To this day, this is the second deadliest structural collapse in the USA after the September 11, 2001, World Trade Center collapse. Ultimately, insurance companies on behalf of archi tects, engineers, contractors, and the building owner settled a class action suit out of court for $151,000,000. This event accentuated the course of tort liability that had the insurance industry reeling in the mid-1980s. Thanks to tort reform across the country, improved safety standards in the various professions, and improved

underwriting standards, the hard market gradually soft ened throughout 1988. The events of September 11, 2001, were the obvious trigger for the hard market that occurred from 2001 through 2004. The insurance losses from this tragic day threw an already struggling insur ance market abruptly into a hard mar ket. Not only did this day CONTINUES ON PAGE 36

“There is no doubt that we are currently in the middle of a hard market..."

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NOVEMBER 2023