Another Year, Another Rate Hike – Insurance Realities in Real Estate

Another Year, Another Rate Hike – Insurance Realities in Real Estate

The Property and Casualty (P&C) market has been hit with record-setting losses over recent years, which translates to strict underwriting standards, limited capacity, and higher premiums for consumers. In Q4 2021, global commercial insurance rates jumped by thirteen percent, which makes it the seventeenth consecutive quarter of increases.

So, what’s causing these loss patterns and rate increases in the commercial P&C market? Unpredictable weather events and nuclear verdicts have led to never-before-seen losses, which translates to higher prices.

Insurance companies that offer coverage in areas that have seen extreme cold, fires, floods, and hurricanes are feeling the effects of unpredictable weather firsthand. In just the first half of 2021, natural disasters caused a total of $42 billion in insured losses globally, which was a ten-year high. From winter storm Uri in Texas to Hurricane Ida in Louisiana and wildfires on the West Coast, these are just a fraction of extreme weather events that swept the country in 2021. This all amounts to billions of dollars in damages. And in areas where financial losses due to natural disasters have been high year over year, some carriers have pulled out of those markets altogether.

Nuclear verdicts are also shaping the availability and cost of coverage. A nuclear verdict is when a jury provides an award in a case that surpasses the $10 million mark. The median cost of jury awards increased almost 1,000 percent from 2010 to 2018, rising to about $22 million. November of 2021 saw a record-breaking award of $1 billion to the family who lost their son in a trucking incident, with the overwhelming majority of the verdict allocated to punitive damages. Though the loss of life is tragic and it’s impossible to quantify, a reward of $1 billion is extremely high.

Unfortunately, these are both trends that show no sign of slowing down in 2022. The US commercial property insurance market continues to feel the repercussions of catastrophic weather events and nuclear verdicts.

This is why the Real Estate industry can expect to continue to see limited capacity and increased scrutiny from underwriters in the foreseeable future. Property developers, managers, and owners will have to continue to provide better information about buildings, particularly roofs.

Underwriters are also going to be more selective about the type of building they insure. If you were able to get away with undervaluing the replacement cost of your assets to pay less in premiums, this will become more difficult to do as carriers seek to recoup losses and obtain better data for their modeling.

What can you do to navigate the complexities of a hardened insurance market?

As a response to market conditions, you can adapt your approach to purchasing insurance to find solutions that can cover the cost of the replacement of your assets. What used to be insured under the same policy might now need to be insured by separate policies based on asset class or geographic location. Splitting up a master program into smaller programs, as appropriate, can lead to cost savings without compromising coverage.

Our team can help you determine if and when this strategy will provide you with the best possible outcome based on your specific circumstances.


Connect with us to learn more about our approach to risk management and how we can help you navigate strict carrier guidelines.


This material has been prepared for informational purposes only and was generated from information provided to BKS from the client and/or third-party sources. Therefore, BKS makes no warranty or representation(s) as to the accuracy or appropriateness of the data and/or the analysis herein. This information is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors for those services.

No Comments yet!

Table of Contents

Recents Post
June Pulse
June 2024 The Pulse Newsletter
Golf cc hospitality state of the market
Hospitality, Golf, and Country Club Market Update
Heat Related webpage
Heat Illness and Workers' Safety Precautions

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. Baldwin Risk Partners, LLC (“BRP”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. BRP does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, BRP does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.

Baldwin Risk Partners, LLC offers insurance services through one or more of its insurance licensed entities. Each of the entities may be known by one or more of the logos displayed; all insurance commerce is only conducted through BRP insurance licensed entities. This material is not an offer to sell insurance.

Get in contact with an advisor today to see how BKS can support you.