Sustainability

Property Insurance Just Got Cheaper for the First Time in Nine Years. The Risk Did Not Change.

11 min read

Property rates down 10%. Cat-exposed down 16%. Reinsurance capital above $700bn. And 2025 still delivered $107bn of insured losses against $220bn of economic damage. The cycle turned. The risk did not. #PropertyInsurance #ClimateRisk #RealEstateInvesting #Underwriting

Abhii DabasByAbhii Dabas

In short

Commercial property insurance rates fell 10% in Q1 2026, the first decline in nearly nine years, with catastrophe-exposed accounts down 16%. The cause is record reinsurance capital above USD 700 billion, not reduced risk: 2025 still produced USD 107 billion of insured losses against USD 220 billion of economic damage. Normalise the premium rather than extrapolating it.

Key takeaways

  • Commercial property and casualty premiums fell in Q1 2026 for the first time in nearly nine years, ending a 33-quarter streak of increases. Marsh recorded property rates down 10%.
  • Catastrophe-exposed accounts fell hardest, down about 16% against 7% for non-exposed, because they had risen hardest between 2022 and 2024.
  • The cause is capital: reinsurance capital passed USD 700 billion, catastrophe bonds exceeded USD 58 billion outstanding, and cat reinsurance rates fell 14.7% at the January 2026 renewal.
  • Risk did not improve. 2025 produced USD 107 billion of insured losses across 190 events, with secondary perils a record 92% of the total, and 51% of the USD 220 billion economic loss went uninsured.
  • The damage to values is already banked: CBRE puts US multifamily value suppression at 3.6% nationally, 6.8% in Florida and 11.1% in Houston.

Introduction

For four years the story about property insurance was straightforward: climate losses were rising, carriers were retreating, and premiums were going one way. In 2026 that story broke. Commercial property rates are falling at their fastest pace in over a decade, catastrophe-exposed accounts are getting the biggest discounts of all, and the hardest-hit markets in Florida and California are seeing carriers return. None of this happened because the weather improved. It happened because a record amount of capital arrived in the reinsurance market, and price followed capital rather than risk. Understanding that distinction is the difference between buying a genuine discount and underwriting a cycle at its top.

The Cycle Turned, and It Turned Hard

A Thirty-Three Quarter Streak Ended. Average premiums across commercial property and casualty accounts declined in the first quarter of 2026 for the first time in nearly nine years, ending a run of 33 consecutive quarters of increases. Marsh data put property insurance rates down 10% in Q1 2026, following an 8% decline the previous quarter. For any investor who has underwritten a property acquisition since 2018, this is the first time the insurance assumption has moved in their favour.
The Biggest Discounts Are in the Riskiest Places. Renewal rates for catastrophe-exposed properties declined roughly 16% year on year, against roughly 7% for non-exposed properties, with multifamily rates down between 5% and 15%. That inversion is counterintuitive until you look at where the increases came from. As Xander Snyder, economist at First American Financial, put it, these accounts experienced the most significant premium increases between 2022 and 2024, so had more room to fall. The discount is largest exactly where the peril is worst.
Terms Improved Alongside Price. Storm deductibles, which rose to 5% during the hard market with some carriers pushing toward 15%, have returned to 5% or less. Deductible movement matters more than headline rate for a leveraged owner, because it determines how much of a single event lands on the balance sheet rather than the policy. Buyers negotiating renewals in 2026 have leverage on structure that did not exist eighteen months ago, and should be using it on attachment points rather than only on premium.
Capacity Is Returning to the Markets It Abandoned. Florida's Citizens Property Insurance, the insurer of last resort, has seen its policy count fall from roughly 1.4 million in late 2023 to about 336,000 as business moves back to private carriers. In California, State Farm reduced rates 10% statewide and nine carriers committed to writing in high-risk areas under the Sustainable Insurance Strategy. The 2025 Los Angeles wildfires produced around USD 40 billion in losses, some 40% below 2024. Availability, not just price, has improved.

Why Rates Fell, and Why That Matters

Reinsurance Capital Hit a Record. Global reinsurance capital exceeded USD 700 billion entering 2026, the highest figure on record. Property catastrophe reinsurance rates fell 14.7% at the January 2026 renewal, the largest year-on-year decline since 2014, and continued softening through the April renewals despite geopolitical disruption including the Iran conflict. When the capital backing a risk grows faster than the premium available to deploy it against, price falls. That is the entire mechanism.
Catastrophe Bonds Did the Rest. Catastrophe bond issuance reached an all-time high, with more than USD 58 billion outstanding by the end of 2025. Cat bonds bring capital market money directly into peril risk, bypassing the traditional reinsurance balance sheet, and they respond to yield rather than to underwriting relationships. That makes the capacity they provide both larger and more mobile than the capacity it supplements. It can be withdrawn at a renewal date if returns disappoint.
This Is a Supply Story, Not a Risk Story. Nothing in the 2026 softening reflects a reassessment of physical risk. No model was revised downward, no coastline was declared safer. Investors reading falling premiums as evidence that climate risk was overstated are drawing a conclusion the data does not support. The market repriced because more money showed up, and the correct question for an owner is not whether the discount is real, which it is, but how durable the capital behind it turns out to be.

The Risk Did Not Move

The Loss Numbers Did Not Cooperate. Swiss Re Institute recorded USD 107 billion in insured losses from natural catastrophes across 190 separate events in 2025. Total economic losses reached USD 220 billion, of which roughly 49% was insured, the highest insured share in the sigma record. A rising insured share is genuinely good news for the resilience of the system, and it also means a larger proportion of each future event lands on carriers rather than on households and governments.
Secondary Perils Are Now the Main Event. Wildfires, severe convective storms and floods accounted for a record 92% of global natural catastrophe insured losses in 2025. This is the structural shift that matters most for property, because secondary perils are frequent, geographically diffuse and much harder to exclude from a portfolio than hurricane exposure. A property can be nowhere near a coast and still sit in the path of the loss category that now drives almost the entire insured total.
The Protection Gap Is Widening, Not Closing. Global economic losses from natural catastrophes reached USD 220 billion in 2025 against USD 107 billion insured, leaving 51% of the damage uncovered. In emerging economies, 80% to 90% of catastrophe losses are typically uninsured. For cross-border investors, this is the single most useful risk signal available: it identifies markets where a severe event is absorbed by owners rather than by the insurance system, and where recovery of both asset values and rental demand will be correspondingly slower.
The Downside Scenario Is Three Times the Soft-Market Assumption. Swiss Re's peak-loss scenario puts 2026 insured losses at USD 320 billion, against USD 148 billion if losses follow the long-term average trend. A single year near the upper end of that range would remove a substantial portion of the excess capital currently suppressing rates, and the market would harden with the speed it hardened in 2022. Any five-year hold underwritten today should assume at least one such year occurs inside the hold period.

What It Already Cost

Insurance Has Already Taken 3.6% Off US Multifamily Values. CBRE estimates that rising insurance costs suppressed US multifamily values by 3.6% nationwide between Q4 2019 and 2024, with the South-Central region down 7.8% and Florida down 6.8%. At market level the effect is far larger: Houston 11.1%, Jacksonville 9.6%, West Palm Beach 5.0% and Oklahoma City 3.8%. This value destruction has already happened. It is not a forecast, and the 2026 softening recovers only part of it.
A Small Line Item Did Disproportionate Damage. Insurance accounts for roughly 8% of total multifamily operating expenses but contributed 17% of total expense growth from Q4 2019 to Q2 2024. As a share of revenue it rose from 1.95% in 2000 to 4.78% in 2024. The reason a line that small can move valuations so much is straightforward: it flows entirely through net operating income, and at a 5% cap rate every additional dollar of annual premium removes twenty dollars of value.
The Per-Unit Numbers Show Where It Concentrated. Operators nationally have been budgeting USD 275 to USD 356 more per unit than in prior years, while Houston rates now exceed USD 1,200 per unit. Fort Lauderdale premiums reached USD 1,430 per unit in January 2024, a 53% year-on-year increase, and four of the five markets with the largest premium jumps over that period were in Florida. Older stock with dated electrical and mechanical systems draws the sharpest pricing and, in some cases, no offer at all.

The Story Outside the United States

Australia Shows the Household-Level Version. Australian home insurance premiums rose 51% in five years, from AUD 1,940 in 2020 to AUD 2,938 by October 2025, with premiums jumping around AUD 1,200 on average from 10 March 2026. For 171,000 households, riverine flood risk alone contributes more than half of the total home insurance premium. This is what a genuinely hard market looks like when it reaches individual owners rather than institutional portfolios, and Australia has not participated in the commercial softening.
The Burden Falls Where It Can Least Be Carried. Roughly 70% of Australian households exposed to the highest flood risk sit in areas where median income is below the national median, and 35% are in areas below the poverty line. A Climate Council survey in January 2026 found 54% of insured respondents concerned that cover could become unaffordable or unavailable in their area, 46% already seeing climate-driven increases and 22% prepared to consider going without insurance entirely. Uninsured neighbours are a risk to insured owners, because post-event recovery is a neighbourhood-level process.
Read Availability Before Price in Any New Market. The most important insurance question in an unfamiliar market is not what cover costs but whether a mainstream carrier will write it at all, and on what terms. A market where cover is available only through a state-backed insurer of last resort, or only with a named-peril exclusion, is signalling something the price alone will not tell you. Obtain an indicative quotation before exchange rather than after, and treat a refusal to quote as diligence output rather than an administrative obstacle.

How to Underwrite Insurance in 2026

Normalise the Premium, Do Not Extrapolate It. A 2026 renewal quote reflects record reinsurance capital, not a durable change in the cost of bearing the peril. Underwriting a ten-year hold on today's rate assumes the softest conditions in nine years persist for the entire period, which no version of the historical cycle supports. Model a mid-cycle premium, and separately stress a hard-market scenario in which cat-exposed rates recover the 16% they have just given back and then some.
Negotiate Structure While You Have Leverage. Deductibles have moved back to 5% or less from a hard-market peak that reached 15% at some carriers. Attachment points, named-storm deductibles and sub-limits are all more negotiable in a soft market than in a hard one, and unlike premium they tend to persist once written into a programme. The best use of the current window is to lock in structure that will still be protecting you when the price cycle turns.
Price the Gap Between Insurable and Insured. With 51% of 2025 catastrophe losses uninsured globally and 80% to 90% uninsured in emerging economies, the practical screen for a cross-border buyer is whether the local insurance market can actually absorb a severe event. Where it cannot, the owner is the reinsurer, and the required return should reflect that whatever the headline yield says. This test matters more in frontier and emerging markets than any comparison of gross rental yields.
Treat Secondary Perils as the Default Exposure. With wildfire, convective storm and flood now accounting for 92% of insured catastrophe losses, screening a portfolio only for coastal hurricane and earthquake exposure misses most of the risk. Flood and wildfire exposure should be checked at the individual asset level, not inferred from country or even city, because these perils vary street by street. That is a diligence habit worth building now, while the premium environment is forgiving enough to make the mistake survivable.

Frequently asked questions

Are property insurance premiums rising or falling in 2026?
They are falling. Average premiums across commercial property and casualty accounts declined in the first quarter of 2026 for the first time in nearly nine years, ending a 33-quarter run of increases. Marsh recorded property rates down 10% in Q1 2026, with catastrophe-exposed accounts down about 16% and non-catastrophe-exposed accounts down about 7%.
Why are rates falling if climate risk is worsening?
Capital, not improved risk. Property catastrophe reinsurance rates fell 14.7% at the January 2026 renewal, the largest annual decline since 2014, while global reinsurance capital passed USD 700 billion for the first time and catastrophe bonds outstanding exceeded USD 58 billion. More capacity chasing the same premium pool compresses price regardless of what the weather is doing.
Has the underlying catastrophe risk improved?
No. Natural catastrophes caused USD 107 billion of insured losses across 190 events in 2025, with secondary perils such as wildfire, severe convective storm and flood accounting for a record 92% of the global total. Total economic losses reached USD 220 billion, so 51% of the damage was uninsured. Swiss Re's peak-loss scenario for 2026 is USD 320 billion of insured losses.
How much has insurance cost already taken off property values?
CBRE estimates insurance costs have suppressed US multifamily values by 3.6% nationwide since Q4 2019, rising to 7.8% in the South-Central region and 6.8% in Florida. Houston is worst at 11.1%, followed by Jacksonville at 9.6%. Insurance is only about 8% of total expenses but drove 17% of total expense growth.
How should I treat the soft market when underwriting?
Normalise it. Underwriting an acquisition on a 2026 renewal quote extrapolates a capital-supply condition rather than a risk condition, and capital can leave an asset class considerably faster than it arrived. Model a mid-cycle premium and stress the deductible, particularly on named-storm and wildfire exposure.

Sources

Author
Abhii Dabas
Abhii DabasFounder & CEO, INTRIC Global

Abhii Dabas is the Founder and CEO of INTRIC Global, the cross-border property intelligence platform for serious investors. He advises high-net-worth buyers on international real estate strategy and has evaluated residential markets across more than 40 countries.

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