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

1. Catastrophe Losses

Hurricanes, floods, wildfires, tornadoes, winter storms. The frequency and severity of major catastrophes continue to stress the industry. In five of the past six years, these events have caused annual insured losses of more than $100 billion globally. Last year, total insured losses globally were estimated at a staggering $140 billion.

2. Reinsurance

Catastrophic events are a major factor driving up the cost of reinsurance — an expense primary carriers need to pass along to customers. At the same time, inflation and the economic environment have been making reinsurers more selective. In early 2023 the gap between reinsurance supply and demand was estimated at $60 billion, three times what it was the previous fall.

3. Underinsurance

Recent inflation has driven the cost of materials and services much higher, but just 43% of business owners say they have increased their policy limits to accurately reflect what it would take to replace insured property now. Customers must have accurate valuations for their assets so they don’t come up short after a loss, and premiums will reflect those higher values.

4. Property replacement cost

Led by a 55% increase in the cost of structural steel and a 35% increase in the price of lumber, construction costs have jumped over the past three years: Nonresidential is up 36% and multifamily residential is up 32%. Similarly, machinery and equipment costs have increased 18% over the same period. Many contractors continue to grapple with materials shortages and supply chain disruptions as well.

5. Skilled labor shortage

Nearly half of reconstruction costs are wages and salaries, which have increased 16% over the past three years. Even with higher pay, nine out of 10 contractors are struggling to find skilled labor and are delaying projects as a result. Higher rebuilding costs and longer delays may trigger an increase in business interruption losses.

6. Property rate need

For years, escalating loss trends have outpaced rate increases, primarily because of the costs of catastrophes, severe weather, and large fires. Expect carriers to raise rates again this year to close the gap.

 In conclusion, it is a difficult market to consider the important factors that are driving premiums for business insurance. While many of these are beyond our control, there are proactive steps that can be taken.

 Understanding your unique situation and making sure your business has the right coverage limits will help you prepare for these various factors that can affect pricing. Researching available options may lead to more cost-effective solutions for insurance protection for your business, and speaking with an experienced agent or broker can be invaluable in getting the best value for your money. Don’t wait – get a quote today to make sure you have the coverage you need when the time comes. Small investments in protection now can pay dividends in the long run and give you peace of mind knowing your business is protected.

Sources:
Travelers.com 
Business Insurance
Moody’s 
reinsurancene.ws
PR newswire
Bureau of labor statistics