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Commercial Property Insurance Coverage: A Rising Rate Climate

Rates have been on a steady climb for commercial property insurance coverage. And thus far in 2019, loss trends continue to create pricing concerns. The market began to harden in 2017 following the second costliest year on record for insured and uninsured claims. Matters were made worse in 2018, which is now the fourth costliest natural disaster year on record for insured losses. With a combined loss total of $230 billion, 2017 and 2018 represent the most insured losses for two consecutive years.1

Commercial property insurance coverage will continue to evolve in 2019. As the market responds to growing loss trends, it’s important to keep an eye on rising rates.Commercial Property Insurance Coverage

Under Pressure

During the first quarter of 2019, certain real estate classes experienced more rate pressure than others. While loss history impacted all, some classes were influenced by additional factors:

  • Habitational / apartment assets experienced 5% to 25% increases (proximity to the coast and higher hail risk were also factors).
  • Hospitality / hotel assets experienced 5% to 15% increases (demand for higher deductibles was also a factor).
  • Dealers open lot experienced 5% to 20% increases.
  • Woodworking operations experienced 5% to 10% increases.
  • Real estate / office buildings / lessors’ risk occupancy (LROs) experienced 5% to 15% increases (concentration of values in a small geographic area was also a factor).

We expect this growing pressure on commercial property insurance coverage to persist through 2019 despite ample market capacity. Most insurance companies remain strongly capitalized, and reinsurance firms continue to view commercial accounts as good sources for higher margins. However, Lloyd’s of London is pushing for higher rates on underperforming classes of U.S. real estate business. Syndicates also warn that they are implementing a performance management approach in response to unsustainable losses.

insured-lossesIn the past, loss-free accounts did not have to subsidize their peers. However, that is not today’s reality. Loss-free accounts will likely experience rate increases for the foreseeable future.

Underwriters will maintain tighter risk sections, smaller limits and increased deductibles, and they will continue in-depth policy reviews. There will also be a greater emphasis on valuations to ensure assets are insured at levels that meet today’s construction costs.

Evaluate Your Options

This evolving rate climate and market uncertainty will require business owners to reevaluate their commercial property insurance coverage. It’s time to take a closer look at retention flexibility, policy structure and carrier selection, including alternative risk transfer operations. SilverStone Group’s Real Estate Risk Services Team has the market insight to help you make informed choices. Our success hinges on our clients’ success, so we urge you to contact our professionals with any questions or concerns about your policies.

¹Sheehan, Matt. “WTW Estimates Industry CAT Losses at $71.5bn for 2018.” January 16, 2019. Reinsurance News website. Accessed on July 8, 2019 at

This article originally appeared in the 2019 | ISSUE TWO of the SilverLink magazine, under the title “Commercial Property Insurance Coverage: A Rising Rate Climate.” To receive a complimentary subscription to the SilverLink magazine, sign up here.

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