Ask The Expert: How are commercial real estate portfolios currently being effected by the insurance market?
“In Q1 of 2019, we began to see a significant shift in the insurance marketplace for real estate portfolios, multifamily being hit the hardest. Similar to other financial markets, the insurance marketplace goes in cycles. Unfortunately for commercial property owners, this happens to be the most challenging part of that cycle.
Adjusted for inflation, 2017 marked the lowest insurance pricing for real estate owners over a 15 year period. At that time, insurance companies were fighting to maintain market share, which led to significant underpricing across the real estate sector. Many of the major players were barely operating at a profit due to attritional losses (hail, fire, water damage, etc.), perils which can either be difficult, or nearly impossible to forecast. This situation, coupled with the hurricane of season of 2017, were the straw that broke the camel’s back.
Many owners who renewed coverage in Q1 or Q2 were able to avoid the market correction in 2019. I would not expect to have such luck in 2020.
With that said, every situation is unique, and some carriers have maintained stable renewals year over year in certain pockets of the country (This has been limited to a small portion of the multifamily sector). To be safe, the earlier you can start the renewal process, the better.”
Franklin Street Insurance Services