August 14, 2023
The commercial multifamily insurance market continued to be challenging in Q2 2023, with rates increasing and capacity tightening. The lack of capacity in the reinsurance market was a major factor driving these trends.
Rates for commercial multifamily insurance increased across the board in Q2 2023. The average rate increase was 10%, but some accounts experienced much higher increases. For example, accounts with loss ratios greater than 50% saw average rate increases of 15%.
The lack of capacity in the reinsurance market was a major factor driving the increase in rates. Reinsurance companies, which provide insurance to insurers, have been pulling back on their exposure to the commercial multifamily market due to a number of factors, including:
Increased losses from natural disasters
Rising construction costs
As a result, insurers have less capacity to write new business and renew existing policies. This has led to increased competition for available capacity, which has pushed up rates.
Companies Pull Out of Coastal Markets
The lack of capacity has also caused some insurers to pull out of coastal markets. These markets are more expensive to insure due to the risk of hurricanes and other natural disasters. As a result, insurers are unwilling to write new business or renew existing policies in these markets.
This is a major challenge for commercial multifamily owners and operators in coastal areas. They are facing higher rates and may have difficulty finding coverage.
What Can Owners and Operators Do?
Owners and operators of commercial multifamily properties can take a number of steps to mitigate the impact of the rising rates and tightening capacity:
Work with a qualified insurance broker. A good broker can help you find the best possible coverage and rates.
Improve your property's risk profile. This includes things like making sure your property is well-maintained and that you have adequate security measures in place.
Consider purchasing additional insurance coverage. This could include things like flood insurance or earthquake insurance.
By taking these steps, you can help to protect your property and your financial interests.