Why Insurance Costs Are Rising and What That Means For CRE
NATURAL DISASTERS AND INSURANCE RISK
Insurance expenses accelerate. Hurricane Idalia made landfall in late August on Florida’s Gulf Coast as a Category 3 tropical cyclone. Idalia brought violent winds, rain and flooding to the region, before hitting Georgia and the Carolinas. The storm surge displaced communities and significantly damaged personal and commercial real estate assets, along with public infrastructure. While the total cost is still being assessed, Idalia occurred just 11 months after Hurricane Ian caused $112 billion in damages to nearby communities southwest of Idalia’s landfall. Beyond the impact to real estate, these and other dangerous weather events have placed meaningful financial risk on living, working and investing in areas subject to extreme climates. Attempting to account for the increasing frequency and impact of natural disasters, insurers have drastically raised premiums over the past few years in states like Texas, California and Florida. Influenced by Hurricane Ian, the average per-unit cost of multifamily insurance across Jacksonville, Tampa-St. Petersburg, Orlando and Miami- Dade climbed by more than 38 percent year-over-year in June. These rates are likely to accelerate further here, as well as in other cities affected by Hurricane Idalia, including Charleston, Wilmington and Savannah.