Article

In today’s volatile insurance marketplace, hospitality companies face mounting challenges: rising premiums, shrinking capacity, and coverage gaps for emerging risks. For forward-thinking operators, the traditional purchase of insurance is no longer a foregone conclusion—it’s an opportunity to take control. Alternative risk transfer, especially through captive insurance, empowers hospitality businesses to transform insurance from a sunk cost into a strategic asset.

Market Overview: Stabilization with Selectivity

The commercial property and casualty market is experiencing cautious stabilization, with direct premiums written expected to grow by 5% in 2025 and 4% in 2026. However, insurers remain highly selective, especially for large-scale hospitality operations with complex risk profiles and significant exposure to high-severity claims.

General Liability Insurance: Key Trends for Large Hospitality Groups

Premium Trends and Market Dynamics

• General liability premiums for large hospitality operations are projected to increase by 1% to 9% in 2025, with most large policyholders seeing 4% to 5% increases.
• Large hotel groups face more challenging renewal conditions due to their scale, geographic spread, and higher claim frequency and severity.
• Increased carrier capacity and improved data-driven risk assessment are moderating rate hikes, but large operations remain under close scrutiny.

Social Inflation and Nuclear Verdicts

• Social inflation continues to drive up liability claims costs, with large hospitality brands particularly exposed due to their visibility and deep pockets.
• The frequency of nuclear verdicts (jury awards exceeding $10 million) is at a 15-year high, with large hotel chains often targeted in high-profile litigation involving guest injuries, liquor liability, and premises liability.
• Notable cases, such as the $60.4 million verdict against Diamond Resorts, highlight the severe financial exposure for large operators.

Third-Party Litigation Funding

• Third-party litigation funding (TPLF) is amplifying the risk for large hospitality groups, enabling more plaintiffs to pursue high-value claims.
• Large brands are especially vulnerable due to their resources and the potential for significant damages in guest injury and premises liability cases.

General Liability Pressures Unique to Large Hospitality Operations

Cost Escalation

• Large hotel groups report general liability premium increases in the 5% to 15% range over the past 12 to 18 months, compounding previous years’ sharp jumps.
• The scale of operations, number of properties, and volume of guest interactions drive higher aggregate exposures and insurance costs.

Risk Factors

• Operational Complexity: Large hospitality brands offer diverse amenities—water parks, spas, event venues—each introducing additional liability exposures.
• High Guest Volume: The sheer number of guests increases the likelihood of slip-and-fall incidents, service-related injuries, and other claims.
• Liquor Liability: Extensive food and beverage operations, including multiple bars and restaurants, heighten liquor liability risks.
• Food Service Operations: Large-scale catering and restaurant services increase exposure to food safety and foodborne illness claims.
• Recreational Facilities: Pools, fitness centers, and recreational amenities across multiple properties add to premises liability exposures.

Market Capacity and Underwriting Trends for Large Hospitality Groups

• Enhanced Risk Assessment: Insurers conduct in-depth evaluations of safety protocols, staff training, and risk management across all properties.
• Geographic Selectivity: Carriers scrutinize exposures in jurisdictions with unfavorable legal climates and in catastrophe-prone regions.
• Coverage Restrictions: Large operators may face sublimits or exclusions for high-risk exposures, such as assault and battery or liquor liability.
• Increased Retentions: Higher deductibles and self-insured retentions are common, requiring large groups to absorb more risk before insurance responds.

Strategic Considerations for Large Hospitality Operations in 2025

Risk Management Excellence

• Centralized Safety Programs: Implementing standardized safety protocols and staff training across all properties is critical.
• Premises Liability Prevention: Regular inspections, hazard mitigation, and maintenance programs reduce exposure to high-severity claims.
• Incident Response and Claims Management: Proactive claims management, rapid incident response, and robust documentation help minimize claim severity and improve outcomes.
• Data Analytics: Leveraging advanced analytics to identify trends and target risk mitigation efforts across the portfolio.

General Liability Program Optimization

• Early Renewal Planning: Initiating the renewal process well in advance allows for comprehensive underwriting and negotiation of favorable terms.
• Coverage Adequacy: Regularly reviewing and adjusting general liability limits to account for increased property values and the potential for nuclear verdicts.
• Alternative Risk Transfer: Exploring captive insurance programs and other risk financing solutions to retain more premium and control over claims.
• Broker Partnerships: Collaborating with brokers experienced in large-scale hospitality risks and with strong carrier relationships.

Why Captive Insurance for Hospitality?

A captive is an insurance company owned and controlled by its insureds—typically, the hospitality business itself. Instead of paying annual premiums to a third-party carrier, a captive allows you to retain underwriting profits, access broader reinsurance markets, and tailor coverage to your unique risk profile. With a significant amount of nuance, potential complexity its important to understand any proposed captive transaction. Captives Insure explores the key details, minimum requirements, and additional considerations you should make in the Alternative Risk Transfer for Hospitality Businesses here.