What We’re Seeing Locally
Coastal property is continuing to take increases in property rates, but the increases are trending lower than the 2023 increases. Properties that are claims-free and well-maintained are experiencing between 5-25%. Carriers are offering full coverage limits or additional coverages and lower deductibles for some risks. Wind coverage has been easier to secure and for masonry and fire-resistive buildings, we have seen some flat and decreasing rates. A heavy 2024 storm, the November elections, continued inflation, or supply chain issues could cause shifts in the current insurance climate.
Trends in Commercial Property Insurance
The commercial property insurance segment has been characterized by ongoing premium increases for much of the past decade. These rate jumps reached record-setting levels in 2023, surging by an average of 20.4% in the first quarter alone and only slightly falling to 18.3% in the latter half of the year. These conditions are primarily the result of another intense season of natural disasters, inflation issues and an increasingly volatile property valuation landscape. Losses stemming from these trends have forced commercial property insurers to continue increasing policyholders’ premiums and introducing more restrictive coverage terms.
In 2024, these difficult market dynamics have somewhat eased; however, most insureds are still experiencing double-digit rate increases. Industry experts reported that average premium jumps ranged between 10.3% and 10.8% during the first quarter of the year. Looking toward the second half of 2024, existing segment challenges will probably press on, so insureds who conduct high-risk operations, have poor property management practices or are located in natural disaster-prone areas may remain susceptible to continued rate hikes and coverage limitations.
Developments to Watch – Natural Disasters
Extreme weather events often leave behind severe property damage. As such, the growing intensity of these catastrophes has posed concerns in the commercial property insurance segment. Global natural disasters caused $17 billion in insured losses during the first quarter of 2024, representing a major increase from the median of $12 billion for this time period over the past 20 years. In the United States, these losses were largely driven by secondary perils, including severe convective storms (e.g., thunderstorms, hailstorms and tornadoes), winter weather events and flooding. The most destructive U.S. natural disaster of the year thus far involved a series of violent tornadoes and large hail that spread across the Great Plains from March 12-16, totaling an estimated $3.4 billion in insured losses.
What’s more, these trends are only expected to worsen as the year goes on. In particular, the National Oceanic and Atmospheric Administration (NOAA) is projecting that unusually warm land and sea temperatures will keep spawning severe storm systems throughout 2024, leading to more tornadoes in an already record-high season and contributing to “above normal” hurricane activity along the Atlantic and Gulf Coasts. Consequently, natural disaster trends will likely continue to exacerbate commercial property losses and create market difficulties in the future
What You Can Do Today
Keep your property in good condition at all times and immediately address building issues that could lead to losses and subsequent claims. Provide all relevant loss control documentation to your insurer.
Analyze your organization’s natural disaster exposures. If your commercial property is in an area prone to certain types of weather and climate events, implement adequate mitigation and response measures.
Get a new appraisal. Independent rebuild appraisals provide accurate data about older buildings and realistic property values – especially important while the economy continues to struggle with supply issues and inflation in all sectors.
For more insurance news and updates, contact the coastal insurance experts at Deeley Insurance Group. Call or text 410-213-5600 today.
