The increasing frequency of severe weather events, such as hurricanes, tornadoes and flooding from heavy rains, is said to be accelerating the cost of property insurance in coastal states including Florida, Louisiana and California. Commercial property insurance premiums were 25% higher for retail properties last year than the average price of the previous five years, according to loan data tracked by CoStar Group, the publisher of CoStar News. The insurance premiums were 27% higher for office buildings and 35% more for multifamily properties. Markets in California and Florida posted some of the highest property insurance rate increases. Rates in Tampa, Florida, were far above the national average in all three property categories.
Severe weather, namely catastrophic floods and triple-digit temperatures, has taken a financial toll on inland markets as well. In Texas, property insurance costs over the past five years were higher than the national average in greater Dallas, Houston and Austin, particularly for apartments.
Major insurance companies including State Farm and Allstate have pulled back on issuing policies in states most affected by rapidly growing weather catastrophes. Analysts now deem some areas of the country nearly uninsurable.
Insurance costs are eating into landlords’ bottom lines, too.
Over the past five years, insurance expenses for properties with loans on the commercial mortgage-backed securities market rose 73%, according to Moody’s Investors Service. That’s a much greater increase than the 19% rise in the consumer price index over the same time, the bond-rating firm said.
By Mark Heschmeyer and Nicole Shih
CoStar News