Inflation is the highest it has been in three decades, which has a direct impact on labor and other operational costs 1 . As the reconstruction costs for homes and buildings continue to rise, property insurance rates are following suit. The recent and ongoing inflation has only exacerbated this trend, leaving many property investors and landlords facing significant increases in their insurance premiums. As it stands now, industry experts are predicting that commercial property and casualty premiums will face an approximate 10% increase 2 for properties located in non-catastrophe-exposed areas, and 15-25% increases in catastrophe-exposed areas. 3 Keep in mind, these predicted rate increases will be higher for properties that have made insurance claims. The cost of rebuilding a rental property or commercial building has increased dramatically in recent years, due in part to a shortage of skilled labor and materials, as well as the rising cost of raw materials. It is expected that property replacement costs will increase by 15% or more from last year. As a result, insurance companies are having to pay more to cover the cost of reconstruction, and they are passing those increased costs on to their customers in the form of higher premiums. Expected insurance payouts due to natural catastrophe claims (including secondary perils, such as floods and hail losses) for 2022 were at $115 billion. That is a steep jump from the previous 10-year average payout of $81 billion per year. 4 The increased losses are leading insurers to raise rates for catastrophe-prone areas, if not pulling out entirely. This will lead to reduced market competition, which will also impact insurance rates. Extreme weather-related events are also referred to as “catastrophe” claims and include hurricanes, wildfires, tornadoes, floods, and earthquakes. WHAT IS A CATASROPHE CLAIM?
INDUSTRY EXPERTS ARE PREDICTING THAT COMMERCIAL PROPERTY AND CASUALTY PREMIUMS WILL FACE AN APPROXIMATE 10% INCREASE.
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