Insurance has always been one of the significant and unavoidable costs involved in commercial property ownership. Owners in areas prone to extreme weather events know their insurance rates are going to be comparatively higher. But something changed several years ago in the commercial property insurance market. In 2017, rates began to go on a steady upswing, and they haven’t stopped. Of course, the cost of everything is on the rise in this inflationary climate, but the hardening of the commercial property insurance market has been more pronounced. Premiums increased by 20.4 percent in the first quarter of 2023, according to The Council of Insurance Agents & Brokers, marking the first time since 2001 that premiums rose more than 20 percent. There are concerns that climate change, contributing to higher temperatures and more frequent extreme weather events, is a contributing factor. Regardless of the cause, the surge in costly property disasters has prompted the insurance industry to respond by scaling back policies in certain areas.
For qualifying commercial property owners, traditionally, the main issue with property insurance has been the cost of coverage. Now, for a growing number of property owners in natural disaster-prone locations, the issue will be whether they can obtain insurance coverage at all. With little public fanfare in late 2022, leading insurer Allstate announced that it would halt new commercial and residential insurance policies in California, a state that has continued to struggle with expensive wildfire property damage. Several months later, in May 2023, insurance giant State Farm
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