Homeowners are strongly encouraged to view this letter from the Association's insurance company:
"Historically, commercial insurance premiums are cyclical. Underwriting and pricing are
influenced by catastrophe-related losses as well as the operating and underwriting
performance and investment income of insurance companies.
"The events of 9/11/11, for example, occurred during a time of already deteriorating
underwriting results for commercial lines insurers. The additional shock of 9/11 losses
catapulted the insurance market into afrenzy and resulted in huge pricing increases in
the reinsurance market beginning in January 2002. Higher reinsurance costs had to be
absorbed by commercial insurers and immediately resulted in higher insurance
premiums for community associations as insurance companies passed along the higher
costs. Premium increases of 35-50% and more wreaked havoc with association
budgets.
"During recent years, the insurance market place has once again become very
competitive and associations have enjoyed lower insurance pricing as has the rest of
the commercial insurance market place. So what might the future bring?
"Between 1953 and 2010 the average number of federal government disaster
declarations was 34 per year. ln 2010 the U.S. had a record number of 81 declared
disasters. As of September 30, 2011, there have been 86 disaster declarations with
three months still left in the year. 2011 is already the fifth or sixth most expensive year
of record for insured catastrophe claim payouts in the U.S. according to the National
Climatic Data Center.
"The high unemployment levels experienced in the current economic environment have
contributed to a substantial increase in claims. Higher unemployment means fewer
people with health insurance. As a result, community associations have experienced an
increased frequency of slip, trip and fall claims as residents look for someone else to
pay for their medical expenses. Financially strained communities have chosen to
submit small property insurance claims to their insurer for payment rather than selfinsuring
these incidents. lnsurance companies are reporting record numbers of claims
and the dollars paid out for claims has risen dramatically.
"A.M. Best reports that the U.S. property and casualty industry's underwriting and
performance have experienced significant deterioration this year. The result is that
industry net income fell 67% during the first half of 2011. At the same time, insurers
combined loss ratio has increased to about 110%. That is, insurance companies have
paid out in operating costs and claims about $110 for every $100 of premium collected.
"What do these hard facts indicate for the future of insurance premiums for commercial
lines insurers and in particular, for community associations? lf current trends continue
to erode insurance companies' financial position, the market place will change. Strict
enforcement of underwriting guidelines and diminished flexibility will result along with
higher premium pricing. Based upon past history, the question is not whether a
tightening of the insurance market place will occur but when that change will occur.
"The most recent insurance industry publications highlight articles entitled "Property
lnsurance Rates on the Rise", "Executives Cautiously Optimistic" and "Travelers CEO
Says His Company's Business lnsurance Rates Up Over 5 %." "Ongoing economic
uncertainty, weak investments and a spate of record-breaking catastrophes" are cited
by industry executives as factors that will turn the market in 2012 and increase
insurance premiums.
"CAU has successfully established a unique position in the market place which allows
community association clients to enjoy specifically tailored coverage at competitive
premiums. By maintaining sound underwriting principles, CAU will continue to offer
comprehensive coverage on a three year, guaranteed rate policy. The continuation of
the three year policy enables CAU's clients, upon renewal, to insulate their community
from the ups and downs of the insurance market place".
