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Trout Insurance Blog

6 Reasons Behind Commercial Property Insurance Costs

2/20/2023

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​The market for commercial property insurance continues to be challenging. Here are several factors contributing to premium increases for commercial property coverage.
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Catastrophe Losses

Hurricanes, floods, wildfires, tornadoes, winter storms. The frequency and severity of major catastrophes continue to stress the industry. In five of the past six years, these events have caused annual insured losses of more than $100 billion globally. Last year, total insured losses globally were estimated at a staggering $140 billion.

Reinsurance

Catastrophic events are a major factor driving up the cost of reinsurance — an expense primary carriers need to pass along to customers. At the same time, inflation and the economic environment has been making reinsurers more selective. In early 2023 the gap between reinsurance supply and demand was estimated at $60 billion, three times what it was the previous fall.

Underinsurance

Recent inflation has driven the cost of materials and services much higher, but just 43% of business owners say they have increased their policy limits to accurately reflect what it would take to replace insured property now. Customers must have accurate valuations for their assets so they don't come up short after a loss, and premiums will reflect those higher values.

Property Replacement Costs

Led by a 55% increase in the cost of structural steel and a 35% increase in the price of lumber, construction costs have jumped over the past three years: Nonresidential is up 36% and multifamily residential is up 32%. Similarly, machinery and equipment costs have increased 18% over the same period. Many contractors continue to grapple with materials shortages and supply chain disruptions as well.

Skilled Labor Shortage

Nearly half of reconstruction costs are wages and salaries, which have increased 16% over the past three years. Even with higher pay, nine out of 10 contractors are struggling to find skilled labor and are delaying projects as a result. Higher rebuilding costs and longer delays may trigger an increase in business interruption losses.

Property Rate Need

For years, escalating loss trends have outpaced rate increases, primarily because of the costs of catastrophes, severe weather and large fires. Expect carriers to raise rates again this year to close the gap.
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  • Insurance
    • Home & Auto Insurance
    • Medicare
    • Income Protection >
      • Disability Insurance
      • Long-Term Care
      • Critical Illness
      • Annuities
    • AARP - Hartford
    • Life Insurance
    • Health Insurance
    • Dental and Vision
    • Employee Benefits
    • Business Owners >
      • Group Health Insurance
      • Commercial Property & Liability
      • Business Overhead Expense Disability
      • Disability for Business Owners
      • Critical Illness
    • Short Term Health
  • Trout Team
    • Our Story
    • Dave Trout
    • Jessica Cody >
      • Home & Auto Insurance
    • Jeremy Sheridan
    • Robert Pugh
    • David Hanson
    • Jennifer Trout
    • Idelle Davids
    • Jan Trout
    • Steve Dillingham
  • Resources
    • Employee Success
    • Fixing the ACA "Family Glitch"
    • Aetna/CVS Health NC
    • Client Center
    • Reviews
    • Blog
    • Articles >
      • Health Insurance 2022
      • Friday Health
      • Comparing 2022 Plans
      • Insurance Partners
      • Best Value Insurance Plans
      • ARP Facts CMS
      • ARP Unemployment
      • ARP 2020 Excess Premium Subsidy
      • No Income Cap
      • Unemployment Glitch
      • Asheville Homesharing
      • 2019 Verification-a
      • BCBS Online Setup
      • APTC Income 2023 & Tax Form 1040
      • Lost Subsidy
      • Privacy Policy
  • Community
    • Alignment's 5-Star Switch
    • Employer Networking w/ Just Economics
    • FALLing with Families
    • Medicare New Era Event October 13th
    • Blue Ridge Pride Festival
    • Health & Wellness Fair
    • Goombay & YMI
    • Alignment Health Plans
    • YMI Winter Coat Drive
    • Medicare Seminar
    • Art in Autumn + MANNA
    • Music on Main
    • Western Women's Business Center Conference
    • Mural on Main Street
    • Expanded Team- Next Generation
    • Back to School
    • Weaverology
    • Mother Earth Food
  • Contact Us