Severe Weather Leads to a Bump in Property Insurance Rates

Fourteen severe weather events categorized by high winds, flooding or tornadoes tormented the U.S. this year leaving billions of dollars in damages and skyrocketing commercial insurance rates in their wake. There is a major difference in what commercial property owners are paying in premiums today compared to a few years ago.

Commercial property insurance rates continue to increase. Prior to a series of major hurricanes that hit two years ago — Irma, Harvey, and Maria — the commercial property insurance space went roughly 16 quarters with sustained rate drops. Rates have gone up 16 percent on average so far in 2019 for office, industrial, multifamily and hospitality properties across the U.S.

That figure rises even higher for commercial properties in high-hazard wind zones or communities commonly impacted by severe weather, such as California, Florida, Texas and the outermost coastal regions that regularly get hurricanes. Commercial real estate owners in these wind zones are facing an average insurance rate increase of 22 percent year to date. Some companies are even seeing rate hikes on commercial property insurance that run as high as 30 percent to 50 percent.

Hidden Deductibles 

As weather-related losses mount across the U.S., commercial property owners also face hidden costs in the form of percentage-deductibles, which requires an owner facing property damage to pay a percentage of the total insured property value rather than a simple baseline deductible. This type of deductible is becoming more common in areas where wind damage from tornadoes and hail is overwhelming insurance companies.

An outbreak of convective, or severe-wind has caused more insurers to turn to these policies. There have been billions of dollars of losses over the past two years from convective storm losses, significantly impacting commercial real estate. These areas suffering high convective storm losses don’t just have an increase in the premium. While 2 percent of the total property value is the traditional percentage deductible set for convective storms, higher rates between 2 percent to 5 percent may be applied for disasters such as hurricanes or California earthquakes. 

A Growing Issue 

Severe damage from wind incidents is becoming increasingly common, and this comes with a hefty expense for your clients. These repetitive weather patterns and increased incidents of damage are causing many agents to pass added costs onto property owners. There is a belief from the industry when looking at natural catastrophic events, over the last 10 to 20 years, that there is an increased frequency of these larger severity events, whether that’s attributable to climate change or weather patterns. People believe that climate change is contributing to a higher frequency and severity of events and the losses are getting larger, too.

About AmSuisse

Formed in 2013, AmSuisse, Inc. has quickly distinguished itself as a wholesale operation that specializes in working very closely with our agents and broker partners to develop responsive, individualized service for each client. Our unparalleled writing support, industry-specific expertise, marketing support, responsive proposals and quotes, strong customer service, and strong relationships with our carrier partners have all helped us to provide the best possible coverage for our clients. To learn more about our available coverage, contact us today at (800) 485-0229 to speak with one of our representatives.