The outlook for insurance operating expenses in 2024 remains uncertain, particularly in the commercial real estate sector.
The continued rise in premium rates is a concern for owners, investors, developers and managers. The complexity of the situation arises from higher interest rates diverting reinsurance capital to alternative investments, thereby limiting insurers' capacity to assume risk. Ongoing weather-related events and third-party litigation funding have contributed to increased costs in Property and Liability insurance. Claims for various property types — including multifamily, student housing, single-family residences, and hospitality — are on the rise.
To address these challenges and contain expenses, clients are exploring various strategies:
- Using captives
- Using alternative risk transfer vehicles, such as pre-funded Property and Liability deductibles
- Using Reinsurance and specialty facilities
- Reducing Property catastrophe limits
- Negotiating with lenders to accept higher deductibles
The following market update is intended to give a snapshot of the trends we're seeing around the country. Every risk is different, and the loss history, quality of the assets and management's engagement in operations all play a material role in the outcome. We welcome your thoughts, questions and comments.