According to the Urban Land Institute (ULI) and Heitman report, reinsurance costs, continued inflation, regulation, and frequent weather-related claims are driving up real estate insurance prices and reducing commercial real estate returns, valuations, and Affecting transactions.
Research shows that rising insurance premiums are putting pressure on property owners, leading to lower net operating income and, in some cases, impacting property valuations and stalling transactions.
Additionally, lenders are tightening lending conditions by imposing stricter insurance terms.
The Rising Insurance: Climate Risk and Real Estate Investment Decisions report includes strategies for securing affordable insurance coverage, investment considerations to make buildings and portfolios more attractive to insurers, and what’s next. We focus on emerging trends that have the potential to reshape the market.
said Laura Kraft, Global Head of Portfolio Sustainability Strategy at Heitman. “Increasing insurance costs are a key factor affecting liquidity in the commercial real estate market. As insurers reprice to limit higher payouts and increased risk, investors They are taking on more risks and upfront out-of-pocket costs.
“As investors and other market participants address these new challenges, the Insurance on the Rise report provides actionable insights and strategies to adapt to the evolving landscape, helping stakeholders stay informed. Make decisions and keep your portfolio resilient.”
“Natural catastrophes are costing the global insurance market tens of billions of dollars, contributing to rising real estate insurance premiums and introducing new levels of uncertainty across the commercial real estate market.” ULI added Lindsay Bulger, Vice President of Urban Resilience at .
She continued: “As the frequency, intensity, and cost of extreme weather events increases, real estate insurance policies are no longer the only risk mitigation strategy for real estate. Strategic management of physical climate risks is part of the solution. I have to.”
The report states that to manage rising costs, investors should not only identify creative protection opportunities, but also strategically manage physical climate risks to attract affordable insurance policies. This suggests that it is necessary to build a portfolio that can maintain profitability.
Investors should also be aware of developments in the single-family home insurance market that may impact commercial real estate.
These include the potential for insurance-driven migration, the widening insurance protection gap, and the solvency of government-sponsored insurance programs.
