The market for commercial property insurance continues to be challenging. Below are several factors contributing to premium increases for commercial property coverage.

1. Catastrophe Losses

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Unprecedented frequency and severity continue to drive catastrophe losses caused by severe convective storms, tornadoes, hail, floods, wildfires, hurricanes and winter storms. Over the past five years, there have been 86 events with losses exceeding $1 billion each in the United States. In 2021, there were 20 such events, preceded by 22 events in 2020, which set a new annual record.1 The total insured losses from global natural disasters totaled $130 billion in 2021, with the United States accounting for $92 billion.2

2. Property Replacement Costs

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The cost of construction has increased 28% over the last five years. In 2021, total nonresidential reconstruction costs increased 16.5%, led by a 51% increase in structural steel and a 22.7% increase in the cost of lumber. Similarly, machinery and equipment replacement costs have increased 8.5% over the same time frame. Having the right insurance coverage limits to meet rising replacement costs is vital in case a business suffers a loss.

3. Skilled Labor Shortage

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Construction project delays and material shortages brought on by the pandemic, coupled with supply chain breakdowns and the ongoing shortage of skilled workers, are increasing the amount of time and money it takes to rebuild. A recent survey from the Associated General Contractors of America found that 89% of contractor respondents reported difficulty in filling positions.4


4. Property Rate Need

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While the industry has seen improvements in rate and terms and conditions for property exposures, the line’s profitability continues to be a challenge, resulting in a continued need for rate. This is driven by the industry’s evolving view of risk associated with years of elevated catastrophe events, rising attritional (non-catastrophic) weather losses and the increased frequency of large fires. Rate increases above loss trend are expected to continue throughout 2022.5

5. Underinsurance

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An estimated 75% of commercial businesses are underinsured by an average of 40% or more.6 With the cost of building materials and labor increasing at unprecedented rates due to inflation and supply chain issues, it is vital for property owners to have current and accurate insurance valuations to make sure limits will cover the costs to replace insured property.


6. Reinsurance

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Over the past five years, major catastrophes have driven reinsurance costs higher, and that trend is predicted to continue.7 Higher costs for both treaty and facultative reinsurance have an impact on rising property insurance rates.



1Billion-Dollar Weather and Climate Disasters: Overview – NOAA
2Global insured nat cat losses total $130B in 2021: Aon
3U.S. Bureau of Labor Statistics, PPI Table 7 (January 2022)
4AGC, 2021 Workforce Survey Analysis
5Insurance rates expected to rise again this year
6Risky business: Right-size your insurance to save money, protect assets
7Reinsurance prices to continue rising in 2022, but pace to slow: Fitch

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