This spring, MGM Resorts informed federal regulators it might pay up to $800 million in liability lawsuit settlements stemming from the 2017 mass shooting in Las Vegas—$751 million of which would be covered by insurance, according to MGM.

Although attorneys for the class-action plaintiffs believe the estimate is premature—and that a settlement may not even be possible in the long run—carriers in the hotel/motel insurance space are taking notice.

“That’s a large loss at a layer excess carriers did not think they would ever see,” points out Kurt Meister, senior vice president and national sales manager at Distinguished Specialty. “That’s going to be driving pricing on the liability side.”

Hotel/motel insurance pricing has been “pretty much flat” for the past 24-30 months thanks to ample capacity in the marketplace, says John Welty, practice leader for Venture’s SUITELIFE program. But that’s not the case anymore, he points out: “In the last three to six months and moving forward, the market is tightening on both the liability and property side.”

Why? Excess liability, for starters, “has been tagged with larger losses and larger verdicts” beyond just MGM, Meister says. The result, Welty says, is that the number of excess liability carriers participating in higher layers of hotel/motel insurance “is diminishing month in and month out.”

But beyond excess, other losses have been trending upward, as well—average slip-and-fall claims, for example, continue to increase, and they comprise “the largest category of claims dollars expended” for hotels, Meister says.

“We’ve also seen much higher-limits losses in areas we had not seen before, like cyber liability and security—claims related to lack of security, or perhaps even a security detail being a little too rough with patrons who become unruly,” Meister adds.

Meanwhile, several heavy catastrophe years have produced similar results on the property side. Recent hurricanes, floods and wildfires “are all driving pricing decisions and limitations,” Meister says. “Carriers are limiting the number of properties they’re willing to insure in a given location. Increasingly, they’re managing their CAT exposure to those types of losses.”

Overall, “we’re seeing some carriers increasing rates, and others exiting the space altogether,” Meister says. “That means there are fewer options, which then tends to drive price up on the macro level, and also drives coverage limitations and exclusions.”

“There’s still capacity in the marketplace from both a property and liability standpoint,” Welty agrees. “But carriers are tightening up that market. They’re being more selective in where they want to write accounts and what type of accounts they want to write.”

What does that mean for your insureds? In regions exposed to wildfire, hurricanes, wind, tornadoes and hail, expect “higher deductibles or a reduction in coverage that’s being provided for those catastrophic perils,” Welty says.

Across the board, Meister observes more carriers limiting coverage—adding restrictions to abuse and molestation coverage in the form of either sublimits or exclusions, for example, or bringing defense inside the limit.

“That trend is disturbing—it means you don’t really have $1 million worth of coverage,” Meister points out. “A hotel can’t stand for those types of limitations. They need to make sure they have the coverage they think they bought. Those are exclusions the agent or broker really needs to negotiate off the policy.”

Finally, because many hotel/motel carriers are “getting pulled into claims they never anticipated being involved in,” Meister says, brace yourself for increased scrutiny on named insureds in hotel/motel policy forms: “Most carriers only want to have one named insured—the first named insured—and then list the other parties as additional insureds.”

Consider, for example, a hotel with a named insured subsidiary that manufactures lotions for the spa. “Those types of product exposures need to be understood by the carrier, not just swept in on a listing of named insureds,” Meister explains. “I hear a lot of brokers say, ‘This needs to be a named insured, that needs to be a named insured,’ but really that’s not the case.”

What about risk management? Keep an eye on IAmagazine.com and the Markets Pulse e-newsletter for five emerging hotel/motel issues to discuss with your clients.

Jacquelyn Connelly is IA senior editor.