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2023 Commercial Property Insurance Market Outlook
February 16, 2023

2023 Commercial Property Insurance Market Outlook

The commercial property insurance market has continued to harden in recent years. In fact, global property insurance prices rose 6% in Q3 of 2022, according to insurance broking and risk management company Marsh. This trend may persist as both insurers and policyholders grapple with rising inflation and economic pressures in 2023. Additionally, climate change will continue to be a factor. For instance, Hurricane Fiona caused $660 million in damages, according to estimates by Catastrophe Indices and Quantification Inc., and such extreme weather events are more likely due to climate change. These pressures may increase premiums or cause policy terms to become more restrictive, some of which have already been seen in the market.

Trends to Watch

  • Inflation—The Consumer Price Index (CPI) rose 6.8% year over year in November 2022, according to Statistics Canada. Inflationary pressures may cause insurers to scale back services or withdraw some altogether in 2023. Consequently, underwriting capacity may reduce, and premiums could increase.
  • Building material costs—The COVID-19 pandemic and Russia’s invasion of Ukraine have put pressure on construction firms, disrupted supply chains, and increased building material costs. Additionally, more than 250,000 construction workers are expected to leave the workforce by 2029, according to construction industry group BuildForce, and such labour shortages may contribute to building delays. These trends are combining to increase rebuild costs, and policyholders could be left vulnerable if they don’t adjust insurance coverage levels to factor in property valuation changes.
  • Extreme weather—Climate change is causing unpredictable and severe weather events. In fact, floods, droughts and major storms could cost Canada’s economy $139 billion over the next 30 years, according to a report by global engineering and architecture services firm GHD. With unpredictable weather, it’s harder for insurers to predict future risks and negotiate reinsurance treaties. As such, associated costs may be passed onto policyholders.

Tips for Insurance Buyers

  • Work with your insurance professionals well in advance of your renewal date. Doing so will make sure your application has ample time to be adequately evaluated by underwriters.
  • Be prepared to provide underwriters with extensive information about your property, such as alarm specifications, smoke detector locations and evidence of fixed wiring and electrical installation inspections.
  • Address any insurer recommendations and take appropriate steps to reduce risks whenever possible. For instance, installing recommended building security measures may make your business more attractive to underwriters.
  • Engage with professionals to estimate your property’s current rebuild cost and adjust coverage levels accordingly.
  • Be prepared for disruptions in 2023 by developing a documented business continuity plan (BCP). This will help your organization remain operational and minimize damages in the event of an interruption. Test your BCP regularly with various possible scenarios.

To learn more about how to protect yourself from these risks, reach out to CMB Insurance Brokers for more information. We can provide you with valuable insights and guidance to help you navigate this challenging market: call CMB at 780.424.2727 or click here to get a quote.