Owners of commercial properties in Texas are facing challenging times right now as business investment property insurance costs have begun to rise in 2018. These are more substantial increases than the typical, expected commercial insurance increases.
Recent natural disasters in Texas and throughout the country have set the stage for significant changes in the business commercial property insurance market, mainly due to catastrophic losses in recent years.
2017 Catastrophic Losses in the Habitation Insurance Sector
In what can only be considered as catastrophic and insurmountable losses, the commercial insurance industry and specifically the primary habitation market has suffered greatly in 2017 as well as the prior few years.
Habitation risk insurance covers wind and hail damage as well as essential flood insurance. This type of business investment property insurance protects the owners of apartment buildings, condos, hotels, and similar properties from the damages caused by extreme weather.
Unfortunately, losses have been so high in 2017 alone from Hurricanes Harvey, Irma, and Maria that business commercial property insurance companies across the nation are now struggling. Preceded by growing losses due to increasing hail damage claims, Texas agencies dealing with the aftermath of Hurricane Harvey are facing billions in losses, a number that is still climbing daily.
Recent Disasters A Major Impact on Commercial Insurance Rates
Due to the extent of losses in the habitation segment of the commercial insurance industry, insurance companies are fighting to find the best ways to recover from these losses. Many insurers that previously offered habitation policies have now withdrawn services in that segment as they are unable to deal with the potential for further losses.
The remaining agencies are being forced to increase their business property insurance habitation rates substantially, which was expected by market experts. These changes are expected to hit especially hard considering that many insurers over the last few years have been underwriting lowering policy rates because of what was then a very competitive market.
2018 Options - Fewer Choices and Rate Increases
Moving into 2018, commercial investors and property owners must be prepared for what is on the horizon. With fewer habitation policies available and rate hikes imminent, property owners now have fewer options for business commercial property insurance.
Market experts warn that property owners can expect rate increases as high as 50% for loss-affected properties, between 10 and 20% for non-affected properties located within catastrophe-prone zones, and up to 5% for all other properties as the industry attempts to rebound from the hundreds in billions in losses.
2018 Options - Stricter Underwriting and Policy Changes
Property owners should also expect stricter underwriting and policy terms, changes to the language in policies to reclassify catastrophe zones, and rewriting of catastrophe models. Some companies have increased deductibles for properties located in specific areas or ones that have sustained certain types of damage. Many have lifted deductible caps.
Market advisors suggest that other business insurance policies including cyber insurance coverage and other lower-risk segments will also experience slight rate increases as underwriters attempt to recover from these losses.
Owners and investors of hotels, multi-family properties, and similar commercial properties in Texas have a difficult few years ahead as the commercial insurance market attempts to reset itself after recent weather-related catastrophic losses. After years of relatively stable rates, business investment property insurance policies are increasing dramatically across the board.
While the extent of increase for a particular property will depend on a number of factors, property owners should start budgeting now for business commercial property insurance hikes, especially for properties in catastrophic-prone areas!