Navigating Risk in 2025: Protecting High-Value Assets and Estates

Construction Private Client Construct a resilient future using a strong risk Ever-evolving risk requires proactive strategies management approach as a blueprint for success. to protect afÒuent families. Risk & Insurance | Employee Benefits | Retirement & Private Wealth

What to Expect in 2025 With traditional insurance coverage continuing to become more expensive and less easily available, a more proactive approach to risk management will be required. AfÒuent families will need to be increasingly cognizant of potential risks in their lives and take proactive steps to safeguard their loved ones, assets, personal data and financial security. Given their dynamic lifestyles and the ever-shifting risk environment, families need to be vigorously engaged in improving their resilience and managing their risk exposures. This will require more frequent, wider-ranging discussions with their risk advisors. 25% of HNW respondents cited safety as one of their emerging top concerns, up from 15% only a year ago. Source: HUB International 2025 Outlook High-Net-Worth Survey 2

Reassessing Risk Exposures With higher premiums come harder choices. Only 31% of high- net-worth families For many afÒuent families, risk management has become are willing to accept 31% greater financial risk to less a matter of how much premiums will cost and more lower their insurance an issue of how much financial risk they are willing and costs, a decrease from able to accept. Either by choice or due to lack of a better 39% in 2023. option, more families are assuming higher levels of exposure, a trend that is expected to continue. As severe weather events continue to push insured face a far more complex set of issues. That’s largely losses to record levels across North America, the cost of because the value of insurance goes well beyond claims coverage continues to rise. Carriers are steadily reducing settlements. Carriers who work with afÒuent families their exposure to the highest risk areas — some carriers typically provide services to improve resiliency, issue have exited catastrophe-prone areas altogether — warnings when major weather events are imminent and rendering some of the highest value homes in regions mobilize recovery vendors and contractors to repair more susceptible to wildfires and hurricanes all but damage. Those who self-insure would have to secure those uninsurable. Not surprisingly, 69% of the respondents services on their own. to the HUB International 2025 Outlook High-Net-Worth Survey1 reported that they have faced challenges securing As the trade-offs between the cost and level of coverage sufÏcient property insurance in the past year. The become more complex, it will be increasingly important solution for some is to redefine what they consider to be for afÒuent families to work with a qualified risk advisor to “sufÏcient.” determine the optimal balance. Most HNW families are already engaging in some level of self-insurance, typically by setting deductibles higher 1. HUB surveyed 200 high-net-worth individuals and their advisors on or dropping riders to reduce their premiums. The small issues relating to risk tolerance, property and investment insurance but growing number who are choosing to fully self-insure coverage. Case Study A HUB client who purchased a $1 million yacht had been declined coverage by several brokers, and the asset was uninsured. Working with a HUB Private Client Risk Advisor, the client was able to secure coverage through HUB’s expertise and strong carrier relationships. As a result, the client further engaged HUB to evaluate all of his personal insurance policies. 3

Covering Collectibles Protecting the rising value of valuables. In April 2023, a single pair of Michael Jordan’s game-worn 2 While the sneakers sold at auction for a record $2.2 million. proud owners would likely be able to secure insurance coverage, the situation may be quite different if the shoes had been damaged or destroyed before their value was documented. What lessons might this hold for other passionate collectors? The collectibles markets are notoriously volatile, with prices tending to soar and retreat as different types of rarities come in and out of vogue. While there is little protection for market losses, there are important considerations for protecting the value of collectibles through proper storage and handling and for adequately insuring against loss due to damage or theft. For example, a collection of rare bourbon can lose most of its value if a backup generator does not kick in during a power outage, and the storage space temperature exceeds 70 degrees Fahrenheit. It can also easily exceed the standard rider on a homeowner’s policy if a few cases go missing. The best protection starts with a current assessment of the value of the objects you collect, particularly those that have become the latest hot commodity or an iconic status symbol, like Hermès Birkin bags. That value should be documented by a qualified appraiser, and depending on the nature of your collection, you may need experts to provide guidance on display, storage and transportation. Regardless, a risk advisor should be consulted so you understand the limits of your coverage and can determine how best to protect the investments you have made in the objects you value. 2. Sneaker Freaker, “Michael Jordan’s Six Game-Worn Championship Sneakers Sell For Record-Breaking $8 Million,” February 4, 2024. 4

Safety and Security Evolving threats at home, away and online. The HUB International 2025 Outlook High-Net-Worth Case Study Survey revealed that afÒuent families feel an increasing A professional sports team experienced an sense of vulnerability. One-quarter of respondents said ofÏce data breach, and one of the executives theft and accidents had a “high” or “very high” impact on their wealth, a 40% increase over the prior year. Nearly a leveraged their relationship with HUB’s Private third also cited cybercrime as having a negative impact. It Client Risk Advisors to step in to mitigate the is less clear whether those perceptions are in sync with the damage. As a result of HUB’s deep expertise nature and magnitude of most likely threats. in handling sensitive cyber events, the busi- Home burglaries in the United States trended down 3.8% ness was able to quickly resolve the issue, from 2023 through 2024, though remained at a high level: minimize impact and enhance safety proto- 2.5 million burglaries leading to an estimated loss of $3.4 cols to prevent repeat events. 3 billion. Of course, the threats to any given family are highly localized, and afÒuent families are well advised to have a thorough security review conducted. A steady rise in international travel is creating an percent of HNW respondents to the HUB survey feel they increasing level of risk for afÒuent families. Illnesses and have adequate liability coverage, yet a significant number accidents are the leading cause of losses, particularly of afÒuent families do not have umbrella liability coverage in regions with less developed medical infrastructure.4 that covers their net worth, making it essential to review Insurance that covers rescue and medical evacuation costs policies and limits with their risk advisor annually. is highly recommended for the more adventurous, as costs for those services can run as high as $100,000.5 3. Securiteam, “US Burglary Statistics 2024,” April 23, 2024. Cybercrime has become the leading criminal threat to the 4. Novo-monde, “The risks of traveling and how to prevent them,” assets of high-net-worth families. Global cybercrime is April 10, 2024. projected to reach $10.5 trillion by 2025, and ultra-high- 5. Global Rescue, Trip Evacuation Travel Insurance, accessed 6 November 12, 2024. net-worth families and family ofÏces are prime targets. 6. Statista, “Estimated cost of cybercrime worldwide 2018-2029,” In fact, 79% of North American families report that the July 30, 2024. threat of cyberattacks has “increased dramatically in the 7. CNBC, “Family ofÏces become prime targets for cyber hacks and past few years.”7 In addition to professional cybersecurity ransomware,” May 21, 2024. reviews, afÒuent families should consult their risk advisors 8. Swiss Re, “Litigation costs drive US liability claims by 57% over past decade, reveals Swiss Re Institute,” September 7, 2024. to determine if cyber insurance policies are warranted. Social inflation is driving liability claims far faster than can be explained by economic factors, contributing to a 57% 8 rise in U.S. settlements over the past 10 years. Fifty-three 5

Future Preparedness Building resiliency and multigenerational legacy. Looking ahead, the greatest threat to generational wealth is not wildfires or hurricanes, but the younger generation’s awareness of the importance of assessing and proactively mitigating the many risks they will face. This begins with age-appropriate education, as early as elementary school when it comes to personal safety and privacy. As kids get older, increasing participation with family advisors can help make risk management a part of becoming a responsible adult. There is also a more immediate issue on the horizon. The temporary U.S. federal gift and estate tax exemption, established in 2018, is set to expire in 2026. If no legislative changes occur before then, the exemption will return to its 2018 limits: $6.03 million for individuals and $12.06 million for married couples. This change could affect over a million American households by subjecting them to increased federal wealth taxation. Families planning to transfer assets exceeding these limits should seek advice on minimizing tax liabilities through strategies such as trusts, family LLCs and other financial tools. This is particularly relevant for owners of privately held businesses who can significantly reduce their tax burden with proper pre-sale planning. Wealthy families should also account for environmental risks in their long-term financial planning. Those wishing to retain primary or vacation properties for future generations should consider how climate-driven losses might affect the cost to maintain prominent homes, as well as their future value. 6

Navigating Your Next Steps HUB Private Client Risk Advisors will work with you to develop a tailored strategy to protect your properties and assets and build resiliency for 2025. Here are some initial considerations: Retaining family wealth involves more than good investments and risk mitigation — it also requires preparing the next 1 Educate the generation. Educate younger family members on how to next generation. manage risk. Ask your broker to participate in the discussion to answer questions and provide a picture of the family’s exposures. From installing wildfire-resistant landscaping and water sensors to upgrading cybersecurity, a little risk reduction can have an outsized Invest time impact on increasing your insurability. Don’t forget to protect your 2 and money other assets: Adequately safeguard valuables, store fine art in in mitigation temperature- and humidity-controlled rooms, and dock your yacht at measures. a marina with 24-hour security. Today’s challenging insurance marketplace requires creativity. Consider Don’t be afraid to look into options beyond the traditional 3 unconventional marketplace, including securing coverage from unique insurance wholesalers. From excess and surplus (E&S) coverage to self- options. insurance options, your broker can find the best mix to mitigate risk for generations to come. Let your insurance broker know about any major life changes or planned property purchases to ensure you’re as protected Be transparent as possible. Review exposures and insurance needs at least 90 4 with your days prior to your policy renewal to allow your broker to find broker. the optimal mix of coverage for your family’s needs. 7 7

Private Client Rate Guide — U.S. HUB International’s rate guidance comprises an analysis of proprietary national survey data and interviews with HUB personal insurance brokers and risk services consultants who specialize in serving personal lines business. On average, rates for middle- to upper-middle-market companies are experiencing rate increases for nearly all coverages as carriers need additional premium to support increased losses and expenses.Below are projections of rate increases that we anticipate in 2025. It’s important to discuss your unique exposure with your insurance broker and understand what to expect well in advance of your next renewal. Coverage 2024 Private Client Insights Rate Guide The market is striving to achieve adequate rate levels within state regulations, a process that is anticipated to take several years. Rate increases for autos persist to counterbalance rising costs for labor, medical and replacement vehicles. The increased use of vehicle technology has also affected the value of replacement parts and Auto +8% to 10% influences the need for additional rate. Distracted driving is the main source of claims activity, an underwriting concern for both frequency and severity. The uptick in auto claims from natural disasters (flood, hail, etc.) compared to previous years remains a pain point. Capacity continues to tighten in some regions, including the Midwest, prompting carriers to leave the market entirely than increase rates. Unprecedented challenges driven by natural catastrophes, such as wind, flood, earthquake and wildfire losses, continue to affect the homeowner’s market. Homeowners +10% to 12% State insurance funds can offer crucial property insurance where the private market might fall short, providing broader coverage access for owners in high-risk areas. Rates continue an upward trajectory due to increased labor costs and shortages, elevated claims activity and extended timelines for repairs and rebuilds. Social inflation remains a primary underwriting concern for umbrella policies, especially in jurisdictions with a history of high- Personal Umbrella +10% to 15% dollar verdicts. Expect increasing severity and frequency of auto claims to raise personal umbrella premiums. Underwriters continue to grapple with the onslaught of extreme weather-related events — convective storms, wildfire and the Atlantic wind/hurricane season (June 1 to Nov. 30). Expect rising reinsurance costs to drive rate increases for catastrophic-exposed areas. Catastrophic Perils +10% to 12% Fewer traditional homeowner insurance companies are writing risks in CAT-prone areas. Many homeowners may need to tap into state insurance funds or the non-standard excess and surplus (E&S) markets for coverage, which is typically priced 30% to 40% above the standard market. 88

Private Client Rate Guide — U.S. Coverage 2025 Private Client Insights Rate Guide Specialty; Much like the automobile market, specialty coverage lines will Motorcycle, RVs, +5% to 10% increase to offset losses driven by labor costs, vehicle replacement Watercraft costs and medical expenses. NOTE: Rate is typically defined as the amount of money necessary to cover losses and expenses while providing an insurance company with a profit for a unit of exposure. Exposure refers to a business’ or individual’s susceptibility to various daily risks. Carriers evaluate the level of risk an insured faces in calculating insurance premiums. 9

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