6 Forces Driving Commercial Property Insurance Costs

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

1. Catastrophe Losses

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Hurricanes, floods, wildfires, tornadoes, winter storms. The frequency and severity of significant 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 globally1. Last year, total insured losses globally were estimated at a staggering $140 billion.2

2. Reinsurance

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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 have been making reinsurers more selective.3 In early 2023, the gap between reinsurance supply and demand was estimated at $60 billion, three times what it was the previous fall.4

3. Underinsurance

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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.5 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.

4. Property Replacement Costs

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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.6 Many contractors continue to grapple with materials shortages and supply chain disruptions as well.

5. Skilled Labor Shortage

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Nearly half of reconstruction costs are wages and salaries, which have increased 16% over the past three years.7 Even with higher pay, nine out of 10 contractors are struggling to find skilled labor and are delaying projects as a result.8 Higher rebuilding costs and longer delays may trigger an increase in business interruption losses.

6. Property Rate Need

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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.9

Originally posted by Travelers.

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Quotes are estimates only, based on the information you provide, information from consumer reporting agencies and other third parties, and your insurance score, and are subject to change based on verification of information, including identification of the property or risk to be insured, claim and credit history, and/or information contained on other consumer reports.

As part of the underwriting process in most states, insurance companies order an insurance score based on your credit history that may be used to underwrite and price your policy. Consumer reports that contain information about your driving*, insurance history, and claim history are also obtained. You have the right to be told the name and address of the reporting agencies that provide these reports and to see and correct your personal information. Please note insurance score is not used in the state of California, for auto insurance in Massachusetts, nor for residential property insurance in Maryland.

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Identifying Information

We collect certain personal information from you when you sign up for our Service that can be used to identify you, such as your name, address, e-mail address, and other information that we deem relevant for the purpose of providing you with our Service, and any information that you provide to us voluntarily. The information we collect from you to the extent that it is private, is disclosed only in accordance with our Terms and Conditions and/or this Privacy Policy.

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We may request you to provide certain information in connection with your request for a home, auto, valuable, or excess liability insurance quote, including but not limited to the following:

For Users Holding and/or Seeking Home, Auto, Valuables and Excess Liability Insurance:

  • General Information: Name, physical address, email address, and other personally identifying information necessary to the insurance coverage.
  • Home Insurance Information: Insurance origination, limits, and other coverage information with respect to existing insurance coverage (if any).
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  • Information necessary to identify your vehicle (e.g., make, model, number).
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  • Property Information: Property address, age, dimensions, and conditions of your property.
  • Safety Information: Safety implements and providers (e.g., fire stations) in or around your property.
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  • Insurance Information: Prior property insurance claims or losses.
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This Policy does not cover cookie practices used by third-party service providers. We will do our best to maintain links to the privacy policies of the third-party service providers that we use in this document.

We take no responsibility for stored information in your cache, or in other devices that may store information, and disclaim all liability of such. In addition, we may, from time to time, retain residual information about you in our backup and/or database.

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Although you are entering into an agreement with AiK2 to disclose your information to us, we do use third-party individuals and organizations to assist us, including contractors, web hosting companies, and others.

Throughout the course of our provision of our Service to you, we may delegate our authority to collect, access, use, and disseminate your information. For example, our web host stores the information that you provide us, and we may hire outside contractors to perform maintenance or assist us in securing our Service.

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AiK2 permits residents of California to use its services. Therefore, it is the intent of AiK2 to comply with the California Business and Professions Code §§ 22575-22579. If you are a California resident you may request certain information regarding our disclosure of personal information to any third parties for their direct marketing purposes. Various provisions throughout this Privacy Policy address the requirements of the Californian privacy statutes. In summary, you must presume that we collect electronic information from all visitors. You may contact us at pcsales@aik2.com with any questions.

12. International Transfer

Your information may be transferred to—and maintained on—computers located outside of your state, province, country, or other governmental jurisdiction where the privacy laws may not be as protective as those in your jurisdiction. If you are located outside the United States and choose to provide information to us, AiK2 transfers Personal Information to the United States and processes it there. Your consent to this Privacy Policy followed by your submission of such information represents your agreement to that transfer.

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We may amend this Privacy Policy from time to time. When we amend this Privacy Policy we will post the changes here. Your continued use of our Service shall constitute your acceptance of such changes.

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