9 Factors Affecting Property Insurance in 2023

Note: The Risk Matrix is produced by the Risk and Insurance® editorial team. Liberty Mutual Insurance is the presenting sponsor and has no responsibility for the content.

From capital and labor to weather and the economy, many factors that affect business today affect property insurance.

The following Risk Matrix, produced by the editorial team at Risk & Insurance®, highlights the likely impact and frequency of 9 factors affecting property risk.

Economic Volatility - While economic growth continues to be strong, a recession may be imminent, impacting property as owners may delay maintenance and repairs to cut costs.

Supply Chain - Some factors contributing to the recent breakdown in the global supply chain have abated, but others — including a hard labor market, geopolitical events and resulting inflated energy prices — could mean that the threat of building material shortages is far from over.

Declining Occupancy - For developers, REITs, property managers and others who rely on real estate as a source of income, the uncertainty surrounding commercial occupancy rates is yet another factor to consider when planning for the future.

Geopolitical Events - The market is looking to price geopolitical risks such as the war in Ukraine more accurately, given their inflationary impact on energy and raw material costs, which in turn drive property maintenance and repair costs.

Severe Weather  and CAT Losses -  Property damages due to extreme weather events — whether they’re as mundane as an early freeze or as catastrophic as a hurricane — are only expected to rise as the effects of climate change become more widespread. 

Reinsurance Costs - The U.S. market is experiencing the most pronounced cycle of price increases in nearly 20 years — one that is seeing greater retention by carriers, a reduction in coverage, and significant rate hikes.

Property Valuation -  Most commercial property owners don’t realize that the recent rise in inflation means their property valuations may no longer be grounded in reality, potentially leaving them dangerously underinsured.

Capital Constraints - Rising interest rates and a hardening P&C market will likely prompt insurers to reconsider their appetites — or look to restructure their programs — making it more difficult to obtain new covers for CAT-exposed properties.

Labor Shortage - Due to the ongoing labor shortage, owners looking to build or repair damaged property are likely to face longer wait times and greater cost to hire, and possibly an increased risk of on-the-job injuries and fatalities once work begins.  

Dan Zeiler

dan@zeiler.com

877-597-5900 x134