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Obstacles for Your Commercial Insurance Renewal Plan… and How to Overcome Them

Record-Setting Reinsurance Rates Threaten the Ability of Real Estate Investors to Receive Adequate Commercial Insurance

Here are the facts. Commercial insurance premiums are increasing. Insurance terms are becoming less favorable. With every passing year, adequate coverage is harder to come by. If you want to protect your real estate portfolio this commercial insurance renewal season, you need to be more forward-thinking in your insurance strategy than ever. Acting as if it’s business as usual could leave your considerable assets vulnerable.

In the last year alone, here are the main socioeconomic and global factors driving these changes in commercial insurance and why they matter to your upcoming renewal plans.

3 Reasons 2023 Commercial Property Reinsurance Rates Nearly Hit a 20-Year High

Driven by a variety of global factors, the commercial insurance landscape is vastly different than it’s ever been. As commercial insurance renewals loom, it’s critical to understand what’s driving these changes, what they mean for your commercial insurance renewals plans, and how to safeguard your portfolio against unfavorable, inadequate, or financially prohibitive insurance.

  1. Natural catastrophes have caused insurance companies to lose money.
  • The increasing frequency and severity of natural disasters (and the associated costs of their fallout) are massively disrupting the global commercial property insurance market.
  • As natural disasters cause more frequent and costly damage, diminished capacity continues to be a growing problem in commercial insurance.
  • What does that mean? Commercial insurance providers can:
  • Increase premiums and rates.
  • Be more selective about which properties they choose to insure.
  • Offer less favorable terms for that coverage.
  • Not always be in a position to provide adequate, gap-free coverage.
  • All told, it’s harder than ever to get adequate, affordable commercial insurance that offers favorable terms.
  • The biggest mistake you can make this commercial insurance renewal season is assuming you’ll get the same amount and quality of coverage you’ve received in the past.
  • Your renewal plans and strategy can’t be the same as last year (and the year before that) because the landscape has changed too dramatically.
  • In this environment, a commercial insurance consultant can reduce your risk by coordinating an insurance strategy across multiple providers that protects you to the fullest extent possible. They can also work with you to craft a long-term insurance strategy that looks to protect your assets, even decades down the line.
  • At MB Davis, this includes innovative, forward-thinking strategies, such as rethinking your capital expenditure strategy.
  1. High inflation has raised the nominal value of buildings and other fixed assets.
  • High inflation has been on many people’s minds over the last year. One major result of that inflation is the increased nominal value of fixed assets, including real estate buildings.
  • Because commercial insurers are responsible for covering these kinds of assets, the increase in value caused premiums and rates to increase.
  • These increases can also be felt specifically in the construction industry. Both the cost of materials and labor have risen dramatically, leading to higher claims in order to cover building repair costs in the wake of increasingly frequent and costly natural disasters.
  • According to the Swiss Re Institute report Natural catastrophes and inflation in 2022: a perfect storm, “the aggregate replacement cost of buildings in 2022 had risen by an estimated 40% since the start of 2020.”
  • These are realities you need to account for in your commercial insurance renewal plans. Nobody wants financial surprises with their commercial insurance. Even if you must pay more this year, the best-case scenario is being financially and logistically prepared for what you need to do to receive adequate, favorable, affordable commercial insurance.
  1. Coverage models and underwriting processes are in flux.
  • In order to respond to rapidly changing social, economic, and physical landscapes, both coverage models and underwriting processes have been adjusting—and they will continue to adjust.
  • This commercial insurance renewal season, you need someone with a finger on the pulse of the industry, as well as a comprehensive understanding of all these factors and how they affect commercial insurance.
  • With so many changes and adjustments happening, you can’t rely on the information and assumptions you’ve always used to navigate this renewal season.
  • To get the best, most favorable insurance in the short and long term, a commercial insurance consultant can provide that broad and deep industry understanding.

Don’t Leave Your Commercial Real Estate Portfolio Vulnerable. Work with a Commercial Insurance Consultant.

You’ve worked hard to build up your commercial real estate investment portfolio. The last thing you want is to lose those gains because of unexpected premium increases or unrealized gaps in your coverage.

When you work with MB Davis Group, you’re getting over one hundred years of combined experience in commercial insurance consulting. You’re getting a trusted partner who can provide insight, guidance, and strategies to ensure your valuable asset portfolio is protected—today and down the line.

Schedule your free consultation today with our founder, Mitch Davis.

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