How Agents Can Help Small Businesses in a CAT-Exposed Hard Market

• June 30, 2025

By Jack Ramsey

As an independent insurance agent, you play a critical role in helping small business owners manage risk. As catastrophe risks increase, that job is only getting more important.

Less than half of small business owners feel fully prepared to manage the risks to their business, according to a recent survey from NEXT Insurance. Notably, 1 in 4 respondents cite natural disasters, from hurricanes to wildfires, among their top concerns.

An increasingly volatile risk landscape is fueling business owners’ fears of being underinsured. Yet, many struggle to understand the fine print of their policies and coverage limits and are unaware of the full scope of their risk exposure. That’s especially true in the current hard market, where policy options shift rapidly.

In many parts of the country, local agents are facing the most challenging insurance market they’ve seen in years. The unpredictable weather patterns of “global weirding,” a term for increasingly erratic and extreme shifts in weather patterns, are fueling a hard market defined by reduced capacity, tighter underwriting and rising costs. It can be a jarring shift for business owners whose premiums jump unexpectedly or suddenly find themselves the victims of severe weather damage.

In 2024, Hurricane Helene revealed the high cost of an unexpected risk on small business owners when it hit southern Appalachia. Historically, flooding wasn’t a concern in that area, but when the storm hit, it left extensive damage that standard policies didn’t cover. On the opposite coast, the growing intensity of wildfires in California has triggered a property insurance crisis, pushing the state deeper into a hard market.

As admitted carriers step away from high-risk areas, agents are turning to the excess & surplus (E&S) market to fill coverage gaps for their clients. Unfortunately, the E&S market offers coverage that lacks many of the consumer protections guaranteed by admitted carriers. While the absence of standardized coverage terms gives clients the flexibility to cover higher-risk exposures, it comes with trade-offs for business owners, including higher premiums, fewer regulatory safeguards, and narrower and more complex policy language.

Additionally, many small business owners don’t understand the difference between admitted and E&S carriers or why their options have changed and may not know what questions to ask until it’s too late.

In this constantly evolving environment, clients look to agents for more than just guidance on securing a policy. They need assistance weighing risks, breaking down complex choices and making smarter decisions about how to protect their business.

Proactive conversations with clients about extreme weather-related risks can surface potential coverage gaps and open the door to more forward-looking planning and a lasting and productive customer relationship.

By helping business owners understand how the market is shifting as catastrophe-related risks continue to evolve, agents can position themselves as trusted advisors, not just a policy provider. In today’s market, coverage is only part of the equation. Clients are looking for guidance from someone who can help them think strategically about risk.

Here are three ways agents can provide support:

1) Break down risk. Property damage, inventory loss and business continuity are typically the main weather-related risks business owners think about. But there may be others your client hasn’t considered, including power outages, supply-chain disruptions, road closures or restricted access to their building.

While small business owners are used to dealing with unpredictability, changing weather patterns and the growing frequency of natural disasters have introduced risks that many have never experienced, adding a new layer of complexity to business decision-making. By walking through what-if scenarios with your clients, you can uncover risks or details they may not have thought to share.

2) Review coverage. You never want to be in a situation where a client assumes they’re covered for a flood or fire and you have to break the news that they’re not. Take the time to reiterate exclusions and limits during policy renewal so clients understand where they may be exposed if a natural disaster occurs.

It’s also helpful to share what you’re seeing in the industry, such as which carriers are responding well to claims and which are pulling out of certain markets. This kind of transparency gives clients greater confidence in the business decisions they’re making, even if the news you have to share isn’t always positive.

3) Offer local insight. Your community knowledge is one of your biggest assets as an agent. You can help business owners make better decisions by sharing the trends you’re seeing on the ground. For example, you might point out that many businesses nearby are adding flood coverage because seasonal rainfall is trending higher in your region.

Beyond coverage guidance, agents can also support clients in other meaningful ways when severe weather causes damage. Whether it’s recommending trusted local contractors, restoration crews or vendors you’ve worked with before, your connections can help clients recover faster and with less stress. That level of support builds long-term relationships and reinforces your role as a go-to resource—not just during policy renewal, but whenever they face uncertainty.

Jack Ramsey is vice president, agent channel, at NEXT Insurance.