Q1 2021 Real Estate & Hospitality Insurance Market Update

Current Development: A Real Estate Knowledge Series

What a difference a year makes. Twelve months ago, the insurance market was in absolute spasms based on fears of run-away COVID claims, reductions in property and umbrella capacity and uncertainty surrounding the impact of a crippled economy on the professional liability market. In 2020, we saw dramatic rate increases for property and liability, particularly in the multifamily asset class, while cyber breaches pushed cyber liability pricing to new highs. In a word, 2020 was in free fall but Q2 2021 is showing moderated rate increases (unless of course you're sponsoring a Special Purpose Acquisition Company or SPAC) and new capacity for both property and professional lines. This optimism is being tempered by no less than $10 billion in Winter Storm Uri losses and predictions for yet another above average Atlantic storm season. As you will find in the following report, there is a distinct flight to data quality and little to no tolerance by insurers for owners and managers who under report values and hide behind their blanket limits. The same can be said about general liability and auto and carriers are separating organizations with robust risk management plans from those who haven't made a meaningful effort to manage their risks. As one prominent Risk Management consultant said to me, "you either tell the truth or pay a higher rate...there are no secrets"

Current marketplace by line of insurance coverage and asset class

Professional Liability

Last year's insurance market premium increases for the D&O and Advisor E&O lines of business have begun to lose steam. The underwriter selection process is still driven by the quality of an insured's risk profile. Asset classes such as industrial, single family, and multifamily assets with solid financial footing are being viewed as asset classes that have best survived the global COVID-19 pandemic. On the other hand, asset classes like retail and hospitality are still experiencing challenges in the marketplace. For these asset classes it is crucial to advocate a strong client narrative in order to secure a successful renewal. With respect to coverage terms and conditions, new exclusions have been rare, providing an element of stability. Underwriters are applying upward pressure to self-insured retentions due to loss experience across the broader marketplace, even if an individual insured has not experienced significant loss experience of their own. Lastly, we are beginning to see the green shoot of new capacity enter the marketplace. This new capacity is largely focused on opportunistic plays thus far, but this is a step in the right direction for a more competitive marketplace in the future.

Large Commercial Office — Property

Commercial offices are holding strong as a desirable asset class among underwriters. Compared to other asset classes, commercial office has maintained high occupancy levels, stable rent collection rates, and lower incurred losses. These characteristics have enticed underwriters to deploy greater capacity for commercial office assets. On the heels of two cycles of significant upward rate adjustments, most insureds can expect a modest rate increase in the range of 7-12% on Class A office portfolios. However, office portfolios with additional challenges such as losses or vacancy can expect a higher degree of underwriter scrutiny and higher rate increases. Underwriters are paying close attention to attritional losses and as a result, All Other Perils (AOP) deductibles of $100K and higher are commonplace. Insureds who continue to spend budgeted capital expenditures (capex) on maintenance and renovations may want to also turn their attention to water shut-off valves and leak detection equipment. Engaging in such type of risk mitigations is well received by underwriters and could merit more favorable terms.

Single-Family Homes — Property

In addition to large commercial office, Single Family Homes is another asset class that has found favor among underwriters due to its desirable risk profile. New capacity continues to pour into the marketplace and carriers are pushing their way into the Single Family Rental space.

The standard deductible for SFR owners is equivalent to their multifamily peer's, but the dispersion of values results in lower attritional loss ratios over the long-term. Winter storm Uri this past February is a prime example. Both multifamily and SFR portfolios with exposures in Texas, experienced widespread damage. On average, multifamily portfolios experienced large-scale water damage from burst pipes. While single-family homes experienced the same type of loss, the average claim per home was lower than that of larger multifamily buildings, leaving SFR owners (and their insurers) better off than their multifamily peers.

Barring any major hurricanes, we expect property rates for single-family portfolios to increase in the range of 7-12%. Owners or managers who are obligated to purchase high CAT limits may see rate increases above this mark, as excess rates appear to be increasing at a faster rate than primary, assuming favorable loss experience.


Hospitality remains a challenged asset class on a number of fronts. From a property perspective the market is beginning to show signs of leveling off for portfolios with clean loss experience and minimal catastrophic risk exposure. These hospitality accounts are experiencing property renewals rate changes in the range of 5-15% while those accounts with significant catastrophic exposures and poor losses can still expect rate increases as high as 20%. Similar to other asset classes hospitality accounts are also experiencing increasing water and AOP deductibles in the ballpark of $100K.

The liability market for hospitality accounts is not dissimilar from property. Accounts with favorable loss history can expect renewal rate increases ranging from flat to 10% and those with less than favorable loss history should expect renewal rate changes greater than this. Lead umbrella liability lines of coverage are still difficult to come by. However, insureds who have already experienced a significant rate/premium increase may experience more mild increases this year as underwriters have already gained much of the rate adequacy they were seeking during the previous difficult renewal cycle.

Tightening terms and conditions continue to be a part of the hospitality renewal process. Insureds should be on the lookout for the addition of exclusions for Sexual Abuse & Molestation (SAM), Fungus, Virus, and Bacteria, and Physical Assault.

Multifamily Liability

Primary General Liability

Insureds who are growing their portfolio via acquisition should be keenly aware of the crime scores in the surrounding neighborhoods. Primary liability carriers are closely examining this metric during their underwriting process. Insureds should review any acquisition requirements stipulated in their policy up front to ensure that a newly acquired asset can be added to their existing insurance program. An insured who adds an asset in a neighborhood with poor crime scores should be on the lookout for mid-term additions of assault & battery sublimits and exclusions. It is crucial for insureds to be aware of the reporting provisions in the policies, as some carriers require immediate notification, if not prior notification to acquisitions.


This remains a challenge – especially in the lead $10M. The frictional cost of insurance begins to have a greater impact on pricing when multiple carriers are required to build out umbrella/excess liability placements. Multiple carriers will drive higher layer relativity costs for insureds. Carriers are showing increased interest in higher layers of the liability placement, but securing the lead $25M continues to prove challenging.

Developer's General Liability

In Q2 2021, we observed continued rate increases across most construction casualty product lines as fewer carriers competed for business and demand for coverage soared amidst significant new project starts. General Liability-only Owner Controlled Insurance Programs (OCIPs), OCIP Excess Liability, and Owners Interest General Liability (OIGL) policies were hit hardest.

Clients should be keenly aware of the following:

  • Exclusion of contingent general liability coverage within owner/developer operational general liability programs for significant construction projects;
  • Rapid uptake of stand-alone OIGL coverage to plug the gap mentioned above;
  • Continued constriction of OCIP excess liability carriers, resulting in rate increases amid diminished competition;
  • Average GL-only OCIP and OCIP excess liability pricing coming in at 1.5% to 2.0% of project hard costs for commercial projects; potentially double that on for sale residential projects.


The tightening of terms and conditions in the environmental insurance market signal a continuation of a hardening marketplace. Insureds should expect higher deductibles and a reduction in limit capacity during the next renewal cycle.

Depending upon the risk profile of an insured and the desired environmental coverage, limit capacity can be hard to come by. A carrier who may have been willing to offer $25M in limits on a particular risk, may now only willing to offer $15M according to Tony Lehnen, Sr. Vice President at Gallagher. This increased scrutiny can be predominantly attributed to an uptick in claims associated with per- and polyfluoroalkyl substances, known as PFAs, and indoor air-quality exposures related to mold and legionella. Gallagher's environmental specialists are constantly monitoring the policy changes being handed down by the USEPA under the Biden Administration and the potential impacts that these changes will have on our clients.

Current marketplace by region

West Coast

Carriers are signaling that elevated rates and hesitancy about deploying large lines of capacity will not be changing in the near future.

With respect to Property, underwriters are maintaining upward pressure on deductibles. Underwriting discipline remains a top priority for carriers. Insureds should expect wildfire zones, protection class, crime score, building valuation, rent collection, and retail vacancy to be critical discussion topics at renewal. The increased scrutiny applied to these variables is also applicable to new acquisitions.

General Liability and Excess Liability capacity is further deteriorating, particularly for multifamily. As for pricing, insured should brace for additional increases, even on the heels of the large increases many insureds experienced in 2020. Excess Liability capacity remains difficult to secure and is a major driver of the cost increases in client programs. In this environment, carriers are seeking to limit sexual abuse, professional, and development/rehab exposures. Communicable disease exclusions are commonplace and should be expected as a standard feature in the policy form.

Midwest and Great Lakes

While challenging renewals persist in today's marketplace, loss free accounts are starting to reach a plateau for pricing increases (except for Frame Multifamily risks). This slight stabilization can be attributed to an uptick in competition amongst markets for quality risks. For accounts that have diligently adhered to risk control recommendations, lower increases and superior renewal outcomes are available.

With respect to property coverage, accurate valuation is mission critical due to the visibility in the media of supply pricing. As for casualty, pervasive litigation linked to sky high settlements has created hardship for landlords and insurers alike. With massive judgements contributing to attritional losses, the umbrella line of business for multifamily accounts remains the hardest segment of the market. Beginning a calculated renewal strategy well in advance is the only way to navigate this difficult marketplace.

Northeast and Mid-Atlantic

Incumbent carriers are starting to show signs of stabilization in the market for "best-in-class" accounts with stellar loss records and a high degree of commitment to risk control. A successful renewal will hinge on detailed underwriting submissions, outstanding compliance with carrier risk control recommendations, and acute attention to risk management. Most carriers are requiring copies of current risk engineering reports and even copies of actual rent rolls.

Questions about civil unrest claims in central business district locations loom. Additionally, water damage concerns abound and carriers are eager to discuss their desire for the implementation of water damage sensors, and leak detection technology. This elevated concern related to water damage has resulted in a new normal of $100k water deductibles. The casualty market is becoming stricter on "construction" related exposures. Furthermore, underwriters are imposing tighter restrictions on assault and battery coverage offerings based on the surrounding area crime rate. The excess casualty market remains extremely hard especially in the primary $25M limit range.

Southeast and Mid-South

In the Southeast and Mid-South regions property increases have lost momentum, especially for accounts with good loss ratios and a portfolio with less than 25% of the assets exposed to catastrophic risk. Overall, property rate change for accounts is still being driven by occupancy, location, historical rate change, and loss experience. For accounts with loss ratios greater than 50%, clients should still expect rate increases of 15-25%, and in some cases, as high as 50%. For accounts with good loss experience, 5-8% increases are more likely. Excess casualty is still trending upwards with rate increases ranging from 5-15%. In addition, many carriers are drastically reducing the limit capacity that they are willing to deploy on umbrella liability. Submission quality is king and putting a go-to-market strategy into action well in advance makes all the difference.

South Central

Following the widespread deep freeze and Texas power blackouts caused by winter storm Uri in February, insureds in the South Central region will experience further tightening in the property market. Real estate clients with large open water damage claims as a result of Uri are experiencing higher rates, premiums, and deductibles compared to the rest of the market. In addition, some carriers are now pushing AOP deductibles applicable per location (as opposed to per occurrence) to mitigate future losses caused by a severe freeze. There are various estimates as to the total amount of insured losses caused by this event and most are falling in the $10 to $20 billion range.

From a primary casualty perspective, we continue to see consistent rate increases in the 5% to 10% range with higher increases for multifamily assets. Portfolios with prior claims involving assault, battery, or any other violent incidents are closely underwritten and priced accordingly. Umbrella and excess capacity in the multifamily space is extremely scarce for the lead $10M with carrier competition increasing above $25M. Workers' Compensation remains the most stable line of coverage with plenty of carrier capacity and small rate reductions for favorable accounts.

Given the highly nuanced nature of the current market, it is imperative that you are working with an insurance broker who specializes in Real Estate and Hospitality. Gallagher’s dedicated experts has a vast network of specialists who understand your business, creating the best solutions in the marketplace for your specific challenges.


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