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The Commercial Property Market Is on the Rebound
The commercial property market is showing signs of stabilization after a tumultuous few years. According to USI Insurance Services' 2025 Commercial Property & Casualty Market Outlook, businesses with a favorable risk profile can expect rate decreases or at least modest increases this year. This marks a departure from the more drastic rate hikes witnessed in 2024, when many insurance buyers faced increases of 10-20%.
Where businesses previously braced themselves for significant hikes, forecasts now suggest a more optimistic trend. Companies that have maintained a good record of loss experience are set to benefit, indicating that managing risk effectively is more critical than ever.
Understanding the Underlying Trends
The change in the commercial property landscape comes on the heels of recent underwriting successes for insurers. With global natural catastrophe insured losses around $135 billion in 2024, insurers are navigating a tightening market carefully. While every company must remain vigilant with risk selection, the expectation of lower rates for those with strong risk profiles suggests a positive shift.
The Rising Threat of Lithium Batteries
However, it's crucial to recognize that not all sectors of commercial real estate are in good standing. Challenges remain, especially with exposure to unique hazards like lithium batteries in electric vehicles. These batteries can create intense heat during fires, increasing property damage risks far beyond traditional sources. For parking structures that accommodate electric vehicles, these risks could have dire consequences. As electric mobility rises, businesses need to be proactive in understanding and planning for these new challenges.
Emerging Opportunities in Alternative Risk Transfer
In response to the shifting landscape, USI reports a growing interest in alternative risk transfer strategies. As businesses look for stability, parametric insurance products are on the rise. These products allow companies to transfer risk through predetermined parameters rather than traditional indemnity policies, offering more tailored and effective solutions for their unique challenges.
Insights on Workers’ Compensation and Liability
Workers’ compensation is also evolving within this framework. While overall rates are expected to decline, the pace is slower than in prior years. With decreasing claims frequency and moderate loss severity trends, companies must remain diligent in their safety practices to capitalize on these favorable rates.
Liability insurance, too, is seeing its share of changes. Rates for directors and officers liability (D&O) insurance are anticipated to stabilize, while employment practices liability rates may vary based on emerging social risks. An awareness of political and ideological affiliations can be critical in navigating these waters.
Conclusion
The stabilization of the commercial property market heralds a new era for both insurers and insureds alike. Businesses that embrace stronger risk management practices will not only safeguard their interests but also align themselves for potential benefits as the market continues to evolve. As the landscape shifts, ongoing education and adaptation will be key for both businesses and policymakers.
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