Commercial Property: Forces Driving Increases
The commercial property insurance market continues to be challenging, with several factors contributing to premium increases for commercial property coverage:
1. Catastrophe losses
Hurricanes, floods, wildfires, tornadoes, and winter storms are occurring more frequently and with greater severity, causing annual insured losses of more than $100 billion globally in the last four years. In 2023, global insured losses totaled $118 billion, with severe convective storms (SCS) accounting for 58% of the losses globally, and six of the 10 most expensive events in the U.S. being SCS events.
2. Reinsurance
While reinsurance capacity has improved, the cost of available reinsurance capacity remains high due to the impact of catastrophic events, increasing cost of capital, financial market volatility, and inflation. These costs are passed along to customers.
3. Underinsurance
Due to increased material and labor costs, insured property replacement values continue to lag. Only 43% of business owners have increased their policy limits to accurately reflect what it would take to replace insured property.
4. Property Replacement Costs
Nonresidential construction costs have increased by 37% over the past four years, with a 65% increase in fabricated structural steel and a 37% increase in the price of concrete products. Additionally, machinery and equipment costs have increased by 22% over the same period.
5. Skilled Labor Shortage
Wages and salaries, comprising nearly half of construction costs, have increased by 22% over the past four years. However, 77% of contractors are struggling to find skilled labor. These factors may lead to higher rebuilding costs and longer delays, potentially triggering an increase in business interruption losses.
6. Property Rate Needed
Due to escalating loss trends, carriers are expected to raise rates again this year to close the gap between loss trends and rate increases.
In summary, the commercial property insurance market is facing significant challenges, leading to premium increases for commercial property coverage. The increasing frequency and severity of catastrophic events, along with high reinsurance costs and underinsurance due to rising material and labor costs, are key contributing factors. As a result, property replacement costs have surged, and there is a shortage of skilled labor, which may lead to higher rebuilding costs and longer delays. Carriers are expected to raise rates further this year to address the widening gap between loss trends and rate increases.
Read the Travelers Insurance Article: https://www.travelers.com/resources/business-topics/insuring/factors-affect-insurance-costs-commercial-property
Mitigating the Financial Risks of a Forced Retirement
An early retirement is a celebratory event when it happens according to your timeline. But it can also be a financial wrecking ball when you’re forced to retire prematurely — something many Americans experienced during the COVID-19 pandemic.
Indeed, more than 3 million additional workers in the U.S. retired during the pandemic than is typical, according to a Federal Reserve Bank of Saint Louis analysis, which found “a significant number of people who had not planned to retire in 2020 may have retired anyway because of the dangers to their health or due to rising asset values that made retirement feasible.”1
But it’s not just a global health crisis that can induce an early retirement. Injury and illness are among the most common reasons that cause a forced retirement. Some on the cusp of retirement lose their jobs and choose to sit it out for good when their employer downsizes or their skill set becomes obsolete. And others stop working before they intended to care for an ailing loved one.
Indeed, those who are forced into early retirement early need to consider the following potential financial risks:
- Longevity risk
- Health insurance coverage
- Inflation
- Sequence of returns risk
Taking steps to manage these risks as early as possible is a must. For guidance, many turn to a financial professional.
Longevity risk after a forced retirement
Those who stop working before their normal retirement age are far more vulnerable to longevity risk — the likelihood of outliving their assets — because they must stretch their savings out over a greater number of years. They also have fewer working years to contribute to tax-deferred retirement accounts, so they start off with less in the bank.
As a general rule of thumb, financial professionals often recommend a 3 percent or 4 percent withdrawal rate during the first year of retirement. Retirees can then adjust that amount higher annually to keep pace with inflation.
Assuming their investment portfolio earns more than 4 percent on average per year, that withdrawal rate ensures that they will only ever spend their earnings and leave their principal untouched.
Early retirees, who need their savings to last longer, may need to learn to live on less. They may also need to reduce their expenses by downsizing to a cheaper house or simply return to work (even part time) for a few extra years to bolster their retirement nest egg.
Those who have the means can also potentially delay claiming Social Security benefits a few extra years to permanently increase the size of their future Social Security checks — the best way to give yourself a raise during retirement.
Health insurance coverage after a forced retirement
Many early retirees underestimate the potential cost of paying for private health insurance during the years before they become eligible for Medicare, the federal health insurance program covering those age 65 and older, certain younger people with disabilities, and those with end-stage renal disease.
Premiums for private health insurance, even for a few years, can consume an oversized portion of your savings, which could undermine your ability to make ends meet throughout retirement.
Options for coverage include COBRA, a spouse’s insurance, retiree health insurance benefits, the public marketplace, private health insurance, membership-based group health plans, and Medicaid for those with demonstrated financial need.
Long-term care (LTC) insurance coverage, which picks up where Medicare leaves off, can potentially curb future costs related to assisted living and nursing home care. Some hybrid life insurance policies include LTC coverage.
Before buying an LTC insurance policy, retirees should speak with a financial professional to determine whether such coverage is the right fit for their family.
Inflation
The rising cost of goods and services, otherwise known as inflation, is enemy number one for retirees.
When you no longer produce an income, any increase in consumer prices erodes your purchasing power. And the more years you spend in retirement, the bigger that threat becomes.
Historically speaking, inflation rises from 1 percent to 3 percent per year. Assuming 3 percent annual inflation rate, a 55-year-old making $50,000 per year who retires today would need the equivalent of about $91,000 by age 85 to maintain the same standard of living.
Inflation, of course, doesn’t always remain within the federal government’s target range. In early 2022, the Consumer Price Index soared to 7.5 percent, the biggest spike in consumer prices since 1982.
Retirees typically scale back their level of investment risk because they depend on their retirement savings for income and can’t afford a period of prolonged losses. While that may be age appropriate, it is also a risk to become too conservative with their asset allocation.
Sequence of returns risk
New retirees, regardless of when they leave the workforce, must also be mindful of market performance.
Those who retire into a bear market, or experience losses or low returns in the early years of their retirement, are statistically far more likely to outlive their savings than retirees who experience losses later on.
Indeed, while permanent life insurance policies are primarily designed to provide a death benefit to protect the ones you love, they also build cash value as premiums get paid – and you can borrow from your cash value for any purpose.
For example, retirees can use their cash value to pay the bills when the market is down, giving their investment portfolio time to recover.
Another way to offset sequence of returns risk is to create a traditional emergency fund worth at least 12 months of living expenses in a liquid account, such as a savings or money market account, from which retirees can draw an income during periods of market downturns.
Conclusion
It’s one thing to plan for an early retirement, but quite another to be forced out of the workforce prematurely. With careful planning, professional guidance, and tools to mitigate multiple risk factors, however, it may still be possible for early retirees to live the lifestyle they had envisioned.
Provided by Matthew Clayson, courtesy of Massachusetts Mutual Life Insurance Company (MassMutual). CA Insurance License # 0I01304
©2023 Massachusetts Mutual Life Insurance Company, Springfield, MA 01111-0001
MM202611-307408
7 Ways You Might Be Sabotaging Your Salad
Salads may not be as American as apple pie, but plenty of people report eating them regularly: four times a week, on average, according to a poll commissioned last year by Fresh Express and conducted by OnePoll. More than half of the 2,000 U.S. adults polled — 62 percent — said that salads are part of their regular diet.
It’s a little puzzling to reconcile those numbers with the staggering rates of obesity in this country, but then, the health value of a salad really depends on quality rather than quantity. While salad — usually conceived as a big bowl of fresh, raw vegetables and leafy greens — has all the makings of a terrific health food, it’s easier than you might imagine to go astray and sabotage your salad. Pouring on the dressing, overdoing the carbs, forgetting about protein, and other common missteps can turn this nutritious meal into a calorie bomb.
Whether you’re ordering out or tossing your own, here are seven common mistakes to avoid.
- Mistake 1: Forgetting Protein
- Mistake 2: Drowning in Dressing
- Mistake 3: Packaged Dressings
- Mistake 4: Going Crazy on the Croutons
- Mistake 5: Boring Bowls
- Mistake 6: Using Light Greens
- Mistake 7: Not Cleaning Around Your Greens
The Magic Formula for a Winning Salad
Now that you’ve learned what salad mistakes to avoid, here’s how to do it right! Cassetty shares her formula for building a satisfying, substantial, nutrient-dense salad. Combine the following:
- Two parts veggies, which could be leafy greens; chopped peppers, cucumbers, or tomatoes; or roasted veggies
- One part carbs, such as quinoa, brown rice, sweet potatoes, butternut squash, or dried or fresh fruit
- Protein, such as eggs, beans, legumes, or tofu
- Fat Cassetty encourages plant-based sources of fat such as avocado, olives, or an oil-based dressing. Cheese works well for certain salads — think beets and goat cheese or a Greek salad with feta.
- Crunchy bits Nuts, seeds, or crunched-up whole-grain chips or crackers
- Flavoring Along with dressing you can add enhancements like Italian, Greek, or everything-but-the-bagel seasoning.
How much of the protein, fat, and crunchy bits should you add? “The amount that would feel comfortable and enjoyable,” Cassetty says. “Think about the fat source as an accessory — it gives your salad lots of flair, but you don’t want to overdo it,” she says. “And protein is a filling element, so how hungry are you? When we base our decisions like that, we’re tuning into our bodies, and that helps us eat more in line with what our bodies need.”
To read the full article click here
By Stephanie Thurrott (March 2023)