3 Factors Driving Commercial Property Insurance Rates
The landscape of commercial property insurance has been steadily toughening over the past years, as indicated by the consistent rise in rates and the presence of challenging market conditions. These changes are primarily attributed to a range of trends that are contributing to increased costs within this sector. Listed below are several key factors that are presently influencing the costs of commercial property insurance.
Catastrophic Losses
Instances of natural disasters such as hurricanes, wildfires, tornadoes, and winter storms often lead to significant losses. The escalating frequency and intensity of these calamities have persistently raised concerns within the commercial property insurance sector. According to industry studies, these disasters have resulted in annual insured losses surpassing $100 billion for five of the last six years on a global scale. In 2022 alone, these losses surged to an estimated $140 billion. Adding to the complexity, many climate experts predict that the trajectory of natural disaster patterns will further amplify the impact of associated catastrophic losses in the years ahead.
Inflationary Challenges
Inflation has emerged as a pervasive challenge across various domains of commercial insurance in recent years. The U.S. Bureau of Labor Statistics (BLS) noted that the consumer price index (CPI) attained a 40-year peak in June 2022, maintaining near-record levels throughout the subsequent months. Although the CPI has moderated somewhat in 2023, it remains elevated, thereby inflating the costs of specific building materials and related property repair outlays. Consequently, inflation has significantly contributed to the escalation of claim costs within the commercial property insurance sphere.
Disruptions in the Supply Chain
Since the onset of the COVID-19 pandemic, a series of disruptions in supply chains have transpired. A majority of these challenges originally stemmed from increased material demand coupled with reduced production and availability during pandemic-induced closures. Despite businesses resuming operations and ramping up production, certain materials continue to be in short supply relative to demand. Moreover, congestion at global ports, geopolitical tensions, escalating fuel and energy expenses, extreme weather events, and the persistent shortage of warehouse personnel and truck drivers have collectively slowed down the shipping and delivery processes for numerous high-demand commodities. These supply chain disturbances have cast an impact on a variety of construction materials, leading to delays in building and structural restoration and consequently extending the timeline for associated commercial property insurance claims.
Get Control of Your Commercial Property Costs
While these are not all of the factors driving commercial property rates, they may be affecting your rates. Contact Insurance Associates today to learn how you can control your costs in this hard market.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
Categories: Blog
Tags: commercial, coverage, insurance, property