If you’re a business owner who’s been watching your commercial property insurance premiums climb year after year, you’re not alone. After enduring 25 straight quarters of premium increases, business owners across the country have been searching for answers about when the market might stabilize and what they can do to manage their costs.
The good news? The commercial property insurance market is finally showing signs of stabilization, and there are strategies you can implement to better position your business in this evolving landscape.
The Road We’ve Traveled
The commercial property insurance market has been on a challenging journey. Between 2022 and 2024, businesses faced relentless premium increases, with some experiencing rate hikes of 25% to 40%. The market was driven by a perfect storm of factors: increased catastrophic weather events, rising construction costs, supply chain disruptions, and a constrained reinsurance market.
The impact on businesses has been significant. Experts predicted 5% to 25% increases in commercial property insurance premiums in 2024, forcing many companies to reassess their risk management strategies and insurance budgets.
Signs of Market Stabilization
However, there’s encouraging news on the horizon. The commercial property insurance market is showing signs of increased stability for the first time in six years, with the market stabilizing in 2024. This stabilization represents a significant shift from the volatile conditions businesses have endured.
The 25-quarter rate increase streak broke in early 2024, marking a turning point in the market cycle. Growth in Commercial Property prices has markedly slowed compared to earlier in 2024, suggesting that the sector has reached its peak and is beginning to stabilize.
What’s Driving the Stabilization?
Several factors are contributing to this market stabilization:
Improved Underwriting Results: The commercial property insurance and reinsurance marketplaces stabilized in 2024 due to positive underwriting results underpinned by previous years’ discipline in capacity deployment, risk pricing and attachment point selection.
Increased Capacity: After years of capacity constraints, the market is seeing more insurers willing to write business, creating healthier competition.
Reinsurance Market Improvements: The reinsurance market, which supports primary insurers, has shown signs of stabilization, reducing pressure on primary market pricing.
Better Risk Assessment: Insurers have refined their risk assessment models and pricing strategies, leading to more accurate and stable pricing.
Challenges Still Ahead
While the market is stabilizing, businesses shouldn’t expect a return to the low-rate environment of the past. The market faces challenges in 2025, resulting in volatility, particularly for catastrophe-exposed properties.
Climate-related risks continue to be a major concern. Storms, flooding, hail, and freezing temperatures are putting more assets in harm’s way than ever before. Properties in areas prone to natural disasters will likely continue to face higher premiums and more stringent underwriting requirements.
Strategic Approaches for Business Owners
In this evolving market, being proactive and strategic about your commercial property insurance is more important than ever. Here’s how you can position your business for success:
Risk Management is Key: Insurers are placing increased emphasis on risk management and loss prevention. Businesses that can demonstrate robust risk management practices are better positioned to secure favorable terms. This includes implementing safety protocols, maintaining properties in excellent condition, and having comprehensive emergency response plans.
Documentation and Transparency: Be prepared to provide detailed information about your properties, including recent improvements, security measures, and loss control efforts. Insurers appreciate transparency and thoroughness in their underwriting process.
Consider Your Coverage Structure: Work with your insurance professional to evaluate whether your current coverage limits and deductibles still make sense. Higher deductibles can help reduce premiums, but ensure you have the financial capacity to handle the increased retention.
Explore Market Options: With market stabilization comes increased competition. Different insurers may view your risk differently, so it’s worth exploring your options. As an independent agency, we can access multiple markets to find the best combination of coverage and pricing for your specific needs.
Focus on Long-term Relationships: In a stabilizing market, building strong relationships with insurers becomes increasingly valuable. Insurers are more likely to offer competitive terms to accounts they know well and trust.
Industry-Specific Considerations
Different industries face unique challenges in the current market:
Manufacturing: Focus on demonstrating robust safety protocols and equipment maintenance programs. Insurers are particularly interested in fire protection systems and business continuity planning.
Retail: Emphasize security measures, inventory management, and loss prevention strategies. Location-specific risks, such as crime rates and natural disaster exposure, will significantly impact pricing.
Healthcare: With increasing cyber risks and regulatory requirements, comprehensive risk management that addresses both physical and digital assets is crucial.
Hospitality: Properties in areas with high natural disaster exposure should focus on mitigation strategies and emergency preparedness plans.
The Role of Technology
Technology is playing an increasingly important role in commercial property insurance. Insurers are using advanced analytics, satellite imagery, and IoT sensors to better assess risks. Businesses that embrace technology for risk management and loss prevention may find themselves in a better position to secure favorable coverage terms.
Consider investing in:
- Smart building systems that can detect and respond to risks
- Security systems with remote monitoring capabilities
- Environmental monitoring for temperature, humidity, and water leaks
- Preventive maintenance programs supported by technology
Looking Forward: What to Expect in 2025
While the market has stabilized, businesses should prepare for continued evolution. The insurance industry is adapting to new realities, including climate change impacts, technological risks, and changing business models.
We expect:
- Continued emphasis on risk management and loss prevention
- More sophisticated underwriting using data analytics
- Increased focus on climate resilience and sustainability
- Greater differentiation in pricing based on individual risk profiles
Working with an Independent Agent
In this complex and evolving market, working with an independent insurance agent becomes even more valuable. Independent agents can:
- Access multiple insurance markets to find the best fit for your specific needs
- Provide objective advice on coverage options and risk management strategies
- Advocate on your behalf during the claims process
- Monitor market conditions and identify opportunities for improvements in coverage or pricing
Taking Action
The stabilization of the commercial property insurance market presents opportunities for businesses to reassess their insurance programs and potentially improve their positions. However, success in this market requires preparation, proactive risk management, and strategic thinking.
Now is the time to:
- Review your current coverage and risk management practices
- Document your loss control efforts and property improvements
- Explore market options to ensure you’re getting competitive terms
- Develop a comprehensive risk management strategy that addresses both traditional and emerging risks
While the commercial property insurance market has presented significant challenges over the past few years, the stabilization we are seeing offers hope for businesses seeking predictable insurance costs. The key is to approach this market strategically, with a focus on risk management, comprehensive coverage, and building strong relationships with insurers.
The businesses that will thrive in this new environment are those that view insurance not just as a cost of doing business, but as a strategic tool for protecting their assets and ensuring business continuity. By taking a proactive approach to risk management and working with experienced insurance professionals, you can position your business for success in this evolving market.