As one of CRE’s most familiar line items, commercial property insurance has historically operated in the background—but that is changing fast.
In 2024, multifamily insurance premiums surged an average of 45% year-over-year, according to Moody’s Analytics, marking one of the steepest cost increases in the sector’s history. That dramatic rise comes even as the broader U.S. commercial insurance market shows signs of moderating—overall commercial premiums rose 5.3% in Q1 2025, down from a 6.3% year-over-year increase in Q1 2024, according to Willis Towers Watson.
So why does this matter for CRE practitioners?
Insurance is no longer merely a line-item. It’s emerging as a silent disruptor to underwriting, financing, and operational budgets. The convergence of climate risk, tighter reinsurance markets, and rising loss cost inflation (the increase in the price of repairing or replacing damaged property due to higher labor, material, and claim settlement costs) is pushing premiums to levels that can undermine deal viability—especially in high-risk geographies. Today’s CRE player must treat insurance not as a standard cost, but as a strategic risk factor:
- Underwriting squeeze: Double-digit premium increases in coastal and extreme-weather zones are cutting into projected NOI—altering cap rate calculations and equity returns.
- Deal fatigue: Insurance availability itself is tightening. Some lenders have signaled they’re pausing underwriting in markets where coverage is becoming unaffordable, or carriers have exited.
- Risk-transfer strategies: Parametric insurance—cover that pays out on measurable triggers such as wind speed or rainfall—is gaining traction as a complement to traditional policies, offering faster payouts and more certainty.
- Resilience as value-add: Securing better premium terms increasingly hinges on property-level upgrades—anything from roof hardening and sprinkler systems to flood mitigation can now materially affect the insurance quote.
When Insurance Moves, So Should CRE Strategy
This isn’t a problem for tomorrow—it’s a disruption unfolding now. Recognizing shifting insurance dynamics as a core part of due diligence, underwriting, and asset management isn’t optional anymore—it’s essential.
For CRE owners, investors, and developers, staying ahead means building insurer relationships early, integrating risk-mitigation upgrades into capital plans, modeling multiple insurance cost scenarios in underwriting, and exploring alternative coverage structures before renewal season hits. In today’s market, those who proactively adapt will protect both their NOI and their deal pipeline—while everyone else risks getting priced out before the first bid is in.
And for those who move first, rising insurance costs aren’t just a hurdle—they’re a chance to differentiate, win lender confidence, and unlock opportunities that less-prepared competitors will have to pass up.
