Why Are Commercial Property Insurance Rates Increasing

 

Why Are Commercial Property Insurance Rates Increasing?

If you own or manage a building, you have probably asked yourself this more than once lately:

“Why are my commercial property insurance rates increasing every single year?”

You pay your premiums.
You fix what needs fixing.
You may not have had a major claim in years.

Yet every renewal, the number creeps up. Sometimes it does more than creep. It jumps.

At Savon Insurance Brokerage and on savonusa.com, this is one of the most common conversations business owners, landlords and investors want to have. They are not just annoyed by higher bills. They want to understand why this is happening and what they can realistically do about it.

The short answer is simple:

Commercial property insurance rates are increasing because the cost of losses and the cost of rebuilding have gone up sharply, and insurers are still catching up.

The long answer is more interesting. It has to do with:

Let us walk through all of this in clear, direct English, the way you would talk it through with a smart friend over coffee, not in a conference room full of jargon.

 

What Is Happening With Commercial Property Insurance Rates Right Now?

Before we jump into causes, it helps to look at the big picture.

Industry data shows that commercial property insurance has been in a “hard market” for several years. That is insurance speak for:

A brief from the Insurance Information Institute (Triple I), citing Marsh McLennan, notes that double digit rate increases have been common for larger or catastrophe exposed commercial properties in recent years. In the fourth quarter of 2023, Marsh reported average increases of about 11 percent for large commercial property risks, with even higher increases for accounts with serious loss history or catastrophe exposure.

Another 2025 market summary from a brokerage tracking commercial property suggests:

The Federal Reserve recently highlighted how sharply property insurance costs have jumped for apartment buildings. Their research found that the average monthly insurance cost per unit for multifamily buildings rose from 39 dollars in 2019 to 68 dollars in 2024, a real increase of more than 75 percent.

The picture is similar in many commercial segments. The worst pressure is on:

Even properties that seem “safe” are feeling the ripple effects of what is happening across the whole market.

To understand why, we need to look at the forces pushing costs higher.

 

Big Driver 1: More Severe Weather And Catastrophe Losses

You cannot talk about commercial property insurance without talking about catastrophes.

Insurers and reinsurers track global losses from events like:

Over the last decade, the numbers have moved in one clear direction: up.

Storms and wildfires are hitting more properties

Reports from Munich Re and Triple I show that the United States has had a high number of billion dollar insured loss events in recent years. In 2024 alone, insured losses from U.S. tropical cyclones were estimated around 51 billion dollars, driven largely by two record breaking hurricanes.

At the same time:

This is not just a home insurance story. Every time a shopping centre, warehouse, hotel, apartment building or office complex is heavily damaged, commercial property insurers absorb big claims.

Climate change is increasing frequency and severity

Large consulting and analytics firms looking at climate risk and insurance note that as climate patterns shift, extreme weather events become more frequent and more intense.

For example, a Deloitte analysis estimated that average monthly property insurance costs per commercial building could nearly double in the highest risk U.S. states by 2030, mostly due to climate driven weather risk layered on top of higher rebuilding costs.

Insurers price for expected future losses, not just the past. When the models show a higher chance of severe storms, wildfires or flooding in a region, they raise the cost of risk across the entire portfolio.

Results at street level

For you as a building owner, this shows up as:

Even if your own property has never had a loss, it lives inside this bigger picture. The overall claims experience of the market affects the rates everyone pays.

 

Big Driver 2: Inflation, Construction Costs And Labour Shortages

Catastrophes explain why more properties are damaged. The second driver explains why each loss costs more to repair.

Rebuilding costs have jumped

Commercial property insurance is based on the cost to rebuild, not the price you paid for the building years ago.

Travelers and other carriers point out that cumulative material costs across many construction sectors are now roughly 40 percent higher than pre 2020 levels, even after some recent easing in supply chains.

Key drivers include:

When a hurricane, wildfire or hailstorm damages a building, the claim is not based on old prices. It is based on today’s cost to repair and rebuild.

Labour is more expensive and harder to find

On top of materials, there is a skilled labour shortage in the construction sector.

Industry surveys show that a large share of contractors say they struggle to find qualified workers, especially after major events when demand for repairs spikes. Travelers notes that these labour shortages can lead to longer rebuild times and higher business interruption losses.

Longer rebuilds mean:

General inflation adds another layer

On top of construction specific inflation, general economic inflation raises:

A joint report from the Casualty Actuarial Society and Triple I found that inflation and social trends significantly increased auto liability losses over the last decade, and similar pressures exist across property claims as well.

Insurers need to collect enough premium today to pay the future cost of claims in this more expensive environment. That simple math pushes commercial property premiums higher.

 

Big Driver 3: Reinsurance Costs And Capacity Behind The Scenes

There is a part of the insurance world that most policyholders never see: reinsurance.

What is reinsurance?

Reinsurance is insurance for insurance companies.

When reinsurance prices spike, the cost flows back into primary insurance rates.

Reinsurers have had a rough run

Several market outlooks explain that reinsurers have faced heavy losses in recent years due to:

To stay profitable and maintain capital, reinsurers have:

One 2024 commercial property market outlook noted that reinsurance capacity challenges, driven by extreme weather and prolonged inflation, have created a tougher environment for property insurers, leading to higher property rates and tighter terms for policyholders.

How this affects your policy

Your insurer likely cannot absorb those higher reinsurance costs alone, so you see the effects as:

Even if your property is not in a hot spot, it may be part of a portfolio that reinsurers treat as more risky overall, which affects your pricing.

 

Big Driver 4: Years Of Undervaluation And Underinsurance

Another subtle but powerful force behind rising commercial property insurance rates is the issue of undervaluation.

Many buildings have been insured too low

For years, many commercial properties were insured based on values that were:

A number of brokers and insurers have pointed out that commercial property was widely undervalued relative to actual replacement costs. Recent articles on the property market list “years of undervaluation” and “underinsurance” as major factors behind current rate increases.

When inflation and material costs suddenly jump, the gap between insured values and real rebuild costs becomes impossible to ignore.

Insurers are pushing valuations up

In response, many insurers are:

This can look like a rate increase even if the rate per 100 dollars of value has not changed much, because:

If your building value jumps from 2 million to 3 million dollars due to revised replacement cost calculations, your premium will rise even if the base rate stays the same.

Underinsurance is dangerous for both sides

For insurers:

For policyholders:

Bringing values up to realistic replacement cost protects everyone, but it also drives higher premiums in the short term.

 

Big Driver 5: More Property In High Risk Areas

Commercial property insurance rates do not happen in a vacuum. They are affected by where people choose to build and invest.

Growth in catastrophe prone regions

Over the last few decades, there has been significant development in:

An article breaking down property rate drivers notes that migration and development into catastrophe prone areas is one of the four major forces behind today’s commercial property market, alongside undervaluation, inflation and reinsurance costs.

When more expensive buildings are placed in harm’s way:

This pushes up rates because insurers and reinsurers see a higher expected loss in these regions.

Global reinsurance spreads the impact

Even if your property is not in Florida, California or along the Gulf Coast, you can still feel the effects.

Reinsurers operate globally. Heavy losses in one region affect their capital and risk appetite worldwide. For example, Hawaii’s property insurance market is being affected not only by local wildfires but also by large losses from wildfires and hurricanes in other states due to global reinsurance ties.

That global interconnection is part of why commercial property insurance rates are increasing in areas that have not personally experienced big disasters.

 

Big Driver 6: Economic And Social Inflation In Claims

There is another layer on top of price inflation for materials and labour. It is often called economic and social inflation.

Economic inflation

This is the straightforward increase in the cost of goods and services.

When:

the same type of claim costs more to settle than it did a few years ago.

A joint report from the Casualty Actuarial Society and Triple I quantified how inflation added roughly 10 to 12 percent to certain liability losses over the 2014 to 2023 period. While that report focused on auto liability, similar inflation pressures apply to property related claims, especially where legal and professional costs are involved.

Social inflation

Social inflation is a more informal term for trends that push claim costs higher, such as:

These trends can show up when property claims involve:

Insurers price for the total cost of claims, not just the physical damage. When legal and social trends increase the size and frequency of big pay-outs, it feeds into premium levels.

 

Why Even “Good Risk” Properties Are Seeing Higher Rates

At this point, many careful owners ask:

“I maintain my building, have no big claims, and I am not on a coast. Why are my commercial property insurance rates still increasing?”

You are not imagining things. Even relatively low risk, well managed properties have seen higher premiums.

Here is why.

You live inside a portfolio

Your individual policy is part of a larger book of business. Each insurer looks at:

If the overall portfolio is under pressure from:

then all policyholders tend to share some of that burden through higher rates, even if they personally have a clean record.

Valuations and rebuilding costs still matter

You may not be in a catastrophe zone, but:

That alone can push total premium up, even if your base rate remains stable.

Capital and regulatory constraints

Global insurance executives also point to broader financial forces. For example, the outgoing CEO of Lloyd’s of London highlighted that increased regulation, geopolitical tension and protectionist policies in various regions require insurers to hold more capital locally, which raises operating costs and contributes to sustained higher premiums, even as new capital enters the market.

All of this means that even “boring” properties are operating in a more expensive risk environment.

 

Are Commercial Property Insurance Rates Going To Keep Rising Forever?

The honest answer is:

Triple I’s late 2024 brief on commercial property noted that while double digit increases remained common for high risk properties, overall the line was showing signs of stabilization and steady growth, rather than the sharp upheaval of earlier years.

Other market reports show that:

So, no, rates are not guaranteed to spike forever. But the new normal for commercial property insurance is very unlikely to look like the soft, under-priced years that many owners enjoyed in the past.

The market is repricing risk to reflect:

Once that adjustment is complete, increases may settle into a more moderate pattern. The question for you is how to position your property so you are treated as one of the better risks in this new environment.

 

What Business Owners And Landlords Can Actually Control

You cannot control the weather. You cannot control global reinsurance prices. But you are not powerless.

Here are the levers you do have.

  1. Accurate valuations and clear data

Start with the basics:

Insurers reward clarity. When underwriters see clean, current data instead of guesses, they can:

Working with a broker like Savon insurance brokerage, you can use cost estimators and appraisals to back up your values rather than just accepting default numbers.

  1. Practical risk improvements

You do not need to turn your building into a fortress. But tangible risk improvements can help:

Travelers and other carriers highlight that proactive risk management, combined with adequate valuations, is a key way businesses can navigate today’s commercial property environment.

When underwriters see a building owner investing in loss prevention, they are more willing to negotiate and may be more flexible with terms.

  1. Deductibles and structure

You cannot fully offset market pricing, but you can adjust how you share risk.

Common strategies include:

A broker can help you model:

The goal is to find a structure where you are not paying top dollar for predictable, small losses you could handle yourself.

  1. Shopping smart, not just cheap

In a hard market, it is tempting to chase the lowest quote. That can backfire if:

Using a broker that works with multiple carriers, like Savon Insurance Brokerage, lets you see a range of options while still having someone in your corner who understands the language, the exclusions and the long term implications.

The goal is not just a cheaper number. It is better value for the risk you truly have.

 

How Savon Insurance Brokerage Helps You Navigate Rising Commercial Property Rates

Savon Insurance Brokerage presents itself as a virtual insurance brokerage that combines online convenience with real human support. Their social profiles highlight that they compare multiple insurance companies for you so you do not have to shop alone.

For commercial property owners facing rising rates, Savon can help in several practical ways.

Translating market forces into your specific situation

Instead of just saying “The market is hard, rates are up,” Savon can:

This context helps you decide:

Comparing carriers and building a strategy

As an independent brokerage, Savon is not tied to a single insurer. They can:

In a market where some carriers are pulling back and others are cautiously expanding, this type of comparison matters more than ever.

Helping you tell your story to underwriters

Underwriters read applications, but they also read the story behind the data.

Savon can help you present:

in a way that shows you are a thoughtful, engaged owner, not just an address on a spreadsheet.

The better that story is, the better your chances of getting fair treatment on rate and terms in a stressed market.

 

Frequently Asked Questions About Rising Commercial Property Insurance Rates

Are commercial property insurance rates increasing for everyone?

Rates have risen across the market, but not at the same pace for everyone.

Will my rates go back down if there are fewer storms for a year or two?

Short term dips in catastrophe losses can slow rate increases, and we have seen some signs of that in recent quarters.

However, insurers are still catching up from:

So it is more realistic to expect stabilization and more modest movements, rather than a return to very low rates from many years ago.

Why is my premium going up even though my limits did not change?

Even if your limits look the same, your rate per 100 dollars of value may have increased due to:

Also, some policies include automatic inflation factors or updated cost indices that raise the underlying insured values in the background, even if you do not change the face amount on the declarations page.

Can I lower my premium by reducing my limits?

Yes, but be very careful.

Reducing limits might lower your premium, but:

It is usually better to:

Is switching carriers the only way to get a better rate?

Sometimes moving to a new insurer can help, especially if your current carrier has taken a very cautious position on a particular region or occupancy.

But in many cases, you can:

Working with a broker like Savon lets you pursue both paths without having to navigate the technical side on your own.

 

Final Thoughts: You Cannot Stop The Tide, But You Can Steer The Boat

Commercial property insurance rates are increasing for reasons that are bigger than any one policyholder.

You cannot change those forces. What you can do is:

That is where Savon Insurance Brokerage comes in. As a virtual, independent brokerage that compares multiple insurance companies for you, Savon can help you navigate rising commercial property insurance rates in a way that is grounded, strategic and realistic, not just reactive.

You may not be able to make your premium smaller overnight. But you can make sure that every dollar you spend on commercial property insurance is doing as much work as possible to protect the buildings and businesses you have worked so hard to build.

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