Property Insurance Premiums Spike in Q1 – Marc Gordon Interviewed

IMG Principal & CFO Marc Gordon interviewed in GlobeSt
Commercial Property Insurance Premiums Spike a Record 20.4% in Q1
Full Article By Richard Berger | Originally published May 19, 2023

WOODLAND HILLS, CA — May 19, 2023 — IMG Principal & CFO Marc Gordon recently spoke with GlobeSt about the impacts of rising costs of property insurance premiums for apartment operators and commercial real estate owners. Recent data shows that insurance premiums for commercial properties have been increasing at double-digit rates in many markets, with some policies offering reduced coverage despite maintaining the same high prices.

In the first quarter of 2023, the average increase in commercial property premiums spiked to 20.4%, marking the first time since 2001 that this line of insurance experienced an increase higher than 20%. Furthermore, 85% of respondents to a survey by the Council of Insurance Agents & Brokers reported a significant decrease in insurance capacity for property insurance. Many insurance carriers are also placing a stronger emphasis on the loss history of the insured property, which has led to non-renewals for accounts with higher loss frequencies.

Underwriting standards have also become more stringent, particularly for properties located on the coast or in areas prone to natural catastrophes like wildfires. Carriers are requiring the review and updating of replacement values and current property updates such as roofs and electrical systems. The age of the building is also affecting underwriting decisions, making it more challenging for older structures to obtain coverage.

The main drivers behind these escalating premiums are inflation and natural catastrophes. Inflation has had the most significant impact on property insurance costs, increasing the expense of repairs, extended loss of use, and supply chain issues with materials. Natural disasters have also contributed to the rising costs, as properties in high-risk areas face higher premiums due to the increased likelihood of damage.

As the trend of rising property insurance premiums continues, it is essential for property owners and operators to carefully assess their insurance needs and explore alternative risk management strategies. It may be necessary to work closely with insurance brokers and carriers to find solutions that provide sufficient coverage at reasonable costs. Additionally, proactive measures to mitigate risks, such as implementing safety protocols and investing in property upgrades, can help minimize the frequency and severity of insurance claims, which may lead to more favorable premium rates in the long run.

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