Commercial Real Estate, Capital, Insurance, Leasing & Management

What to Expect for Commercial Insurance Rates in 2019

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Insurance expert Matt Harrell shares his outlook on the 2019 commercial property market.

Excerpted from 2019 National Real Estate Investor Outlook story.

The most frequent question I’m asked today is “How will the 2018 hurricane season impact the insurance market in 2019?” As the current marketplace struggles to find its footing between hard and soft markets, rates are scattered, and carriers are targeting anywhere from a 5% decrease to a 20% increase. 

Although an overall pricing decrease is becoming less common, it is still achievable for the right type of portfolio. Generally, newer construction risks with few losses are getting the best terms and pricing at renewal. We’re now seeing most markets satisfied with a 5% average overall increase, though a few markets are pushing for higher rates on certain asset classes with significant exposure to natural catastrophe perils.  

Fortunately, the harrowing images of the damage caused by Hurricanes Michael and Florence are not indicative of the actual impact they will have on insurance rates. Total insured losses from these storms are expected to be at most $13 billion. However, the insurance marketplace is capitalized to withstand a $100 billion-plus event, and these storms should not dramatically impact the property insurance marketplace. Renewals in hurricane-prone regions are expected to be somewhere between flat and a moderate +7% increase, which is the result of a strong, well-capitalized reinsurance market flush with alternative capital.   

The flood events from Hurricanes Harvey, Irma, Florence and Michael in recent years have created an increased awareness of the importance of adequate flood coverage. The majority of flood insurance is purchased through the National Flood Insurance Program (NFIP), which has continued to take on record debt each year, reaching a total of $30 billion in 2017.  

The Federal Emergency Management Agency (FEMA) has made significant changes to the program recently, including rate increases across almost all policies. NFIP rate increases are averaging 8%, with the most significant increases coming in as high as 25% for pre-FIRM, non-primary residential and commercial locations.   

Alternatively, the private flood insurance market has proven to be a competitive option for mitigating the rate increases and uncertainty associated with the National Flood Insurance Program. Flood insurance is a difficult coverage to underwrite, and the increasing sophistication of the private market can deliver a more price-stable alternative for property owners. 

The insurance market in hail exposed regions has become very challenging. Hail-related claims in Texas, Oklahoma, Colorado, Kansas, Missouri and Nebraska have increased significantly both in frequency and severity over the past few years. Carriers that have not exited the market in these states have responded by increasing both rates and deductibles. Depending on loss history and location, rate increases for portfolios in these states can range from 5 to +15%.  

Multifamily has become the most challenging sector within the real estate industry when compared to retail, office and industrial. Over the past several years, carriers have aggressively underwritten multifamily risks to gain market share and grow premium volume. Unfortunately, these aggressive underwriting practices have caught up to carriers not charging enough premium to cover the inevitable underwriting losses. Rate increases for multifamily risks that have experienced significant losses can be as high as 20%. In these scenarios, aggressive risk management practices should be implemented to prevent and minimize future losses.  

In conclusion, although we are not in a hard market, rate increases are expected in 2019. An awareness of what to expect for your portfolio will be an important part of planning for your insurance renewal.   

As Managing Director, Matt Harrell brings a wealth of industry experience to Franklin Street Insurance Services. He can be reached at [email protected]


For full 2019 National Real Estate Investor Market Outlook, visit

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