Fire and water damage loss trends are driving more property risks to the E&S market

In recent years, there’s been a noticeable migration of property risks to the E&S market, driven by higher premiums, stricter underwriting guidelines and – in part – caution among standard lines carriers to cover properties with loss trends, especially related to fire and water.

Any small incident related to fire or water can quickly escalate, affecting multiple units or even entire buildings. Fires spread rapidly, especially in densely packed areas, causing extensive damage. Similarly, water damage in one unit might not remain isolated and can cause significant losses to neighbouring properties.

Fighting fire

The rise in devices powered by lithium batteries – everything from smartphones and laptops to electric vehicles and e-bikes – has unfortunately been accompanied by an increase in fire incidents linked to these batteries. A number of factors contribute to these fire outbreaks, including manufacturing defects, damage to the battery, overcharging, or exposure to high temperatures.

The chemical composition of these batteries means such fires can be challenging to extinguish. In New York this past June, four people were killed and two others seriously injured after a lithium-ion battery malfunctioned and sparked a fire in a first-floor e-bike shop and quickly spread to apartments above.

In 2022, New York City saw more than 200 fires blamed on lithium-ion batteries. Such incidents have been increasing steadily elsewhere too.

Surging water losses

As a result of changing weather patterns, there’s been an increase in intense rainfalls leading to flooding and water damage. These environmental shifts mean many properties in areas previously considered 'safe' zones are now considered higher risks.

Weather patterns are causing stress and are not the only cause. More flexible work schedules and less maintenance staff means fewer occupants in buildings. This means fewer eyes are there to spot and correct problems. One undetected water leak can lead to a very costly property damage claim.

For property risks seeing these loss trends, the E&S market is inherently more flexible to meet their needs. The rise in fire losses and water damage incidents emphasises the importance of adaptable and comprehensive insurance solutions that the E&S market is uniquely positioned to provide.

Chris Lee is head of E&S property at Axa XL