In the insurance markets, like most others, 2008 has been a challenging year to say the least. Shrinking premiums and soft market conditions have left many wondering if there is any hope on the horizon.
Quite the opposite is true for the agencies that have found a few booming markets associated with a bust cycle in the economy. One such market is the failing mortgage market, more specifically the distressed and foreclosed asset market. Insuring this market comes as a breath of fresh air to many agencies who have found it more by mistake than through any deliberate marketing efforts.
It is an echoing story that repeats itself each and every day in the National Programs division of All Risks, Ltd. It starts out with a phone call and the bewildered agent on the other end of the phone, frantic to help a client. "I have a bank that we write a lot of the P&C insurance for..." the voice says with a short pause, "they are getting quite a few foreclosures and asked me if I could find them insurance." The voice continues. "I don't even know where to begin and we saw that you had a program for this, can you help?" Usually as we progress into the phone call and determine that our REO/Lender Placed Insurance Program is a perfect fit, you can hear the light bulb go off over the phone. "Do you have marketing materials that our agency can use to promote this program to other banks?" The voice says on the other end of the phone.
It is exciting to be a part of this discovery process with our agency partnerships. It is also very stisfying to know that another agency has successfully found a market in which the current economic conditions will provide for rapid premium growth. Seeing this opportunity and seizing it now is the difference that it takes to succeed in a soft market.
Leading economists have predicted that the current market is only the first uptick of a foreclosure storm that will be unprecedented in the history of our country. Many lenders have been on mandatory foreclosure moratoriums in order to prevent the markets from being saturated by undervalued "fire sale" properties. In the last half of 2009 and beginning of 2010, these foreclosures will be hitting the market , swelling the number of foreclosures dramatically. Then comes phase two. The commercial real estate market, that is now near record high default levels, will start a foreclosure cycle that will rival or exceed that of what we have seen in the residential markets. The combination of these factors will create the perfect storm to capitalize on the market to provide insurance programs for these properties.
It will be the agencies that position themselves to offer a good insurance program, designed with the lending institution's needs in mind, that will be able to take advantage of this upswing in business and enjoy a new level of success in 2010.
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