2025 Commercial Property Insurance Market Outlook 

The reinsurance market stabilized in 2024 due to several factors, including significant growth in catastrophe bonds, which increased available capacity. This greater access to reinsurance capital enabled insurers to take on larger and more complex risks. Consequently, some insureds found it easier to secure coverage. Additionally, premiums softened in 2024; risk management company Marsh found that commercial property insurance rates fell by 1% in the third quarter of 2024.

Although rates may continue to moderate in 2025, several challenges, especially the impact of severe weather events, weigh on the market. Intense flash flooding in Toronto and Southern Ontario, floods in part of Quebec, wildfires that swept through Jasper and a destructive hailstorm in Calgary resulted in more than 200,000 insurance claims during the summer of 2024, according to the Insurance Bureau of Canada (IBC). It remains to be seen what impact these events will have on the insurance market in the coming year. As such, premiums could rise in 2025, especially for those located in natural disaster-prone areas.

Tips for Insurance Buyers

• Adopt robust property management practices and immediately address building issues that could lead to losses and subsequent claims. Consider the merits of smart technologies to aid in loss control efforts.
• Proactively prepare for extreme weather events to reduce losses. Specifically, develop or review your business continuity plan to help your organization remain operational and minimize damages in the event of an interruption.
• Ensure accurate ITV valuations. From there, determine whether you need to adjust your organization’s policy limits to avoid the perils of underinsurance.
• Work with 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.

Developments and Trends to Watch

• Natural disasters—The IBC found that the four catastrophic weather events mentioned above caused more than $7 billion in insured losses, almost double the losses recorded for the entire year prior. Moreover, the government of Canada reported that the country is warming at approximately double the global average rate, which could make severe weather events more likely in the future. Organizations with robust property management and risk mitigation measures may be best positioned to navigate the commercial property insurance market in 2025.
• Underinsurance—According to insurance brokerage Hub International’s 2025 North American Outlook Report, 73% of organizations are underinsured against “profit-threatening risks,” and 96% don’t have formal processes for identifying and obtaining their annual reported property values and exposures. Underinsurance could leave organizations having to cover a significant portion of the costs to repair or rebuild their commercial properties in the event of a loss. Reviewing insurance-to-value (ITV) calculations will be critical in 2025 to help avoid out-of-pocket expenses.
• Alternative risk transfer options—Premium hikes associated with inflationary pressures and pervasive natural disasters over the past few years have made some insureds—especially those with challenging risk profiles—consider alternative risk transfer options. Parametric coverage and structured fronting are two such options that could witness traction in 2025. Risk transfer options can provide insureds with customized solutions and, in some cases, cost savings.
• Smart buildings—Smart thermostats and automated lighting controls are becoming standard in many commercial buildings. In 2025, the adoption of smart building technologies may accelerate further. Smart sensors may be installed to proactively detect water leaks or monitor temperature and humidity, helping building owners predict and prevent potential problems. Moreover, organizations may be able to use “smart” data to demonstrate compliance with safety regulations, which could lower premiums.

This Market Outlook is not intended to be exhaustive, nor should any discussion or opinions be construed as professional advice.