The U.S. commercial property insurance sector is showing signs of stabilization after years of consistent rate increases, according to a new report from the Insurance Information Institute (Triple-I). The updated analysis highlights that, for the first time since 2017, commercial property insurance rates decreased, with rates shifting from a 3.4% increase in Q1 2024 to a 0.94% decrease in Q2 2024, based on AON’s latest market data.
Despite ongoing challenges such as inflation and climate-related risks, the report emphasizes strong underwriting performance and improved investment returns as pivotal for sustaining profitability in the sector. “Increasing climate and catastrophe risk, particularly secondary perils, drive losses,” said Dale Porfilio, Chief Insurance Officer at Triple-I.
Climate Risks and Catastrophe Losses
The 2024 Atlantic hurricane season added complexity to the market, with insured losses from tropical cyclones reaching an estimated $51 billion. Hurricanes Milton and Helene alone accounted for 80% of these losses, at approximately $25 billion and $16 billion, respectively. However, total insured losses for 2024 slightly decreased compared to the previous three hurricane seasons.
Reinsurance capacity remains sufficient, but the market’s competitiveness in 2025 will be crucial, given the sustained frequency of catastrophic events.
Challenges of Undervaluation
The report also underscores a concerning trend of undervaluation in commercial property coverage. A study by Kroll revealed that 90% of buildings appraised in 2020-2021 were underinsured, with 68% undervalued by 25% or more. This issue, combined with a downturn in commercial rents and the maturation of over $1 trillion in real estate loans in 2025, could add volatility to the market.
“This vulnerability could ignite a shift in property insurance dynamics when claims exceed policy coverage,” said Porfilio. “Insurers must innovate and transform underwriting practices to address these evolving risks effectively.”
Industry Outlook
As insurers and policyholders navigate these challenges, the report predicts shifts in underwriting practices, policy structures, and relationships between insurers and commercial clients. The findings emphasize the need for comprehensive coverage options to mitigate the increasing complexity of risks in the commercial property market.
For more insights, visit the Insurance Information Institute’s resources, which provide data-driven analysis to empower consumers and industry stakeholders.