Article

Commercial Property Insurance

Commercial property and casualty insurance is expected to rise:

• Increases of 7-15% are anticipated for commercial property coverage
• Businesses in catastrophe-prone areas may see even higher rate hikes

Reinsurance Costs

Reinsurance rates, which ultimately impact primary insurance costs, are rising sharply:

• Property reinsurance rates increased by ~35% in 2023
• Further increases in reinsurance costs are likely, which will trickle down to policyholders

Regional Variations

Rate increases will vary significantly by location:

• Florida and California may see some of the highest increases due to hurricane and wildfire risks
• Even states with historically lower catastrophe risk, like Iowa and Minnesota, are experiencing rising rates

Factors Driving Rate Increases

Several factors are contributing to these rate hikes:

• Increasing frequency and severity of natural disasters, particularly severe convective storms
• Rising construction and repair costs due to inflation
• Insurance companies adjusting their risk models to account for climate change impacts

Long-Term Outlook

The insurance industry is likely to continue adjusting rates and coverage in response to climate-related risks:

• Some insurers may reduce coverage limits or introduce higher deductibles
• There may be a shift towards parametric insurance products for certain perils
• State-backed insurance programs may see increased enrollment as private market options become limited or unaffordable

As climate change continues to impact weather patterns and catastrophe losses, policyholders should expect ongoing pressure on insurance rates and potentially reduced coverage options in high-risk areas.