MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
1
CRE
Insurance costs trends becoming a headache
for the CRE market
Summary
Insurance coverage cost and availability has become an increasing pain point for commercial
real estate (CRE) market participants. Property insurance expenses traditionally inflate by
roughly two to three percent per year, which is a typical expense budgeting target of
underwriters, lenders and asset managers. However, year-over-year insurance cost growth has
spiked to over 17% in some markets in recent years. We found that on average nationally, CRE
properties have seen about a 7.6% annual growth rate since 2017. The average cost of
insurance tends to be much higher for properties exposed to acute climate risks, but the
elevated insurance expense growth rate is largely ubiquitous across the country.
On top of this, some property owners are struggling to get coverage or maintain the requisite
coverage in their loan agreements, which leads to rippling implications for lenders.
Understanding the growing insurance expense trends and availability challenges provides an
important foundation from which to preemptively factor this into underwriting and
structuring deals around insurance requirements. Exploring the potential drivers of these
changes can also begin to indicate how these trends may evolve over time.
We reviewed the insurance costs trends of over 100,000 properties over the last 20 years. In
this report we summarized trends in insurance rates nationally and identified the markets with
the highest insurance costs and rate of cost inflation. We also differentiated properties and
their insurance costs where our modeling suggests the greatest potential damage and
business interruption due to acute climate-related hazards, such as hurricanes, floods and
wildfires.
REPORT
3 AUGUST, 2023
Authors
Kevin Fagan
Head of CRE Economic Analysis
Natalie Ambrosio Preudhomme
Associate Director
Caglar Demir
Assistant Director of Research
Contact Us
Americas
+1
.212.553.1658
clientservices@moodys.com
Europe
+44.20.7772.5454
clientservices.emea@moodys.com
Asia (Excluding Japan)
+85 2 2916 1121
clientservices.asia@moodys.com
Japan
+81 3 5408 4100
clientservices.japan@moodys.com
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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Insurance Rates are Rising Nationally
Insurance rates are increasing nationwide, with a particular spike in the last five years. Overall insurance rates tend to increase
gradually over time, as we would expect given inflation. Our data shows that during times of economic downturn (ie 2009-2011)
prices decline gradually rather than increasing gradually. We also see that beginning around 2018 or 2019, depending on the
property type, the rate of increase in the past several years is noticeably higher than the gradual increase of previous years.
While different property types show moderately different rates of increase, the trend is consistent for all of them, as Figure 1
illustrates. This trend is also ubiquitous across geographies, supporting a more anecdotal theme heard repeatedly in the market
over the last year: the recent rapid increase in insurance premiums is proving challenging or prohibitive for some CRE transactions,
particularly for lenders that have long relied on insurance to offload most physical risks associated with properties.
Figure 1 Average annual insurance and rolling average annual growth in insurance by property type
Source: Moody’s Analytics CRE
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Average Insurance Cost ($/unit)
Average Annual Growth Rate
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Multifamily
3-Yr Rolling Average Annual Growth Average Cost
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Average Cost ($/ sq ft)
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3 Yr Rolling Average Annual Growth Rate Average Cost
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Average Cost ($/unit)
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3-Yr Average Annual Growth Mean Insurance Cost
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
3
Looking Past the Averages, Cost Increases Skew High
There is a wide distribution of insurance cost growth around the national average. There is a significant share of properties that
have maintained historically normal insurance inflation, but the distribution does skew toward the higher-than-average expense
increases. The cost growth is not isolated to a small handful of properties or markets.
Among all properties we examined, the biggest share of them experienced insurance cost compound annual growth rates (CAGRs)
above 10% from 2017 through 2022, as Figure 2 shows. This was the case across all CRE property types. Additionally, the majority
of properties across each property type saw insurance premium CAGRs over 5% over the last five years.
The bottom line is that, if these trends continue, most properties are likely to see well-above historical average insurance expense
growth. One of the differentiators is that some markets’ insurance costs are growing at higher rates than others, which we’ll dive
into in the next section.
Figure 2 Distribution of insurance expense CAGR (2017-2022) across properties
1
Source: Moody’s Analytics CRE.
Note:
1
National average CAGR shown in middle of charts.
Some Metros Are Trending Much Worse than Others
Insurance expenses are trending higher than prior to 2017 in the vast majority of markets, but some metros are feeling the pain
much worse than others, with many having average annual growth rates above 10%. There isn’t an obvious relationship between
region of metros and insurance cost growth, but Texas, Sunbelt, Northeastern and California metros tended to be among the
metros with highest growth rates.
We also noted that the property type with the most metros having >10% annual insurance cost growth rates since 2017 was
multifamily. Therefore, in the remainder of this section, we’ve focused on multifamily metros and their insurance trends. Similar
metro trend data for the other property types is provided in the Appendix.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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Metros with the highest median rate of insurance increase are spread across the country, with 25% of the top 20 metros for
multifamily located in Texas. Multifamily properties have the highest median CAGRs. Table 1 shows insurance expense CAGR
alongside rent CAGR for additional context for “real” expense growth, inasmuch as expenses are impacting the bottom-line
property net operating income (NOI).
Table 1. Top (left) and bottom (right) metros for 2017-2022 insurance expense and rent CAGR for multifamily
1,2
METRO INSURANCE CAGR RENT CAGR METRO INSURANCE CAGR RENT CAGR
Colorado Springs 17.3% 6.3% District of Columbia 3.4% 2.5%
Tulsa 14.9% 4.3% Chicago 5.0% 5.6%
San Antonio 14.8% 4.7% Minneapolis 5.1% 3.5%
Dallas 14.4% 6.1% New York Metro 5.2% 3.8%
Oklahoma City 14.3% 4.1% Northern New Jersey 5.6% 4.7%
Memphis 14.3% 6.8% Long Island 5.9% 4.4%
Fort Worth 14.2% 5.2% Pittsburgh 6.1% 4.8%
Raleigh-Durham 13.7% 6.6% Cleveland 6.2% 6.4%
Nashville 13.4% 4.0% Hartford 6.4% 4.7%
Kansas City 13.3% 5.2% Buffalo 6.5% 4.9%
Austin 13.2% 5.9% Philadelphia 6.7% 5.7%
Salt Lake City 13.2% 6.4% Detroit 7.0% 4.9%
Los Angeles 13.0% 4.8% Westchester 7.0% 5.7%
Knoxville 13.0% 6.8% San Diego 7.8% 5.8%
Orlando 12.9% 7.7% Oakland-East Bay 7.9% 4.0%
Columbia 12.8% 2.8% Norfolk/Hampton Roads 8.0% 5.8%
Fort Lauderdale 12.7% 7.7% Milwaukee 8.3% 5.1%
Houston 12.6% 4.1% Suburban Virginia 8.4% 2.8%
Charlotte 12.6% 6.9% San Jose 8.5% 2.4%
Jacksonville 12.4% 7.6% Rochester 8.6% 6.0%
Source: Moody’s Analytics CRE
Notes:
1
To obtain the median CAGR by metro we calculated the CAGR for each property with an insurance value in 2017 and 2022 and then took the median of that sample. See the
Appendix for the highest and lowest CAGRs and insurance prices for the other four property types.
2
To obtain rent CAGR we used average metro level rent growth from 2017 through
2022.
Higher rates of increase of insurance expenses do not appear to be isolated to metros with the highest CAGR for rent, meaning
insurance expenses are exceeding general metro-level rent inflation in most cases. However, it is noteworthy that Florida metros,
many of which have some of the highest insurance cost CAGRs also have seen some of the highest growth in rents. Florida metros
have experienced both high general inflation on top of having insurability issues stemming from hurricane risk. These metros
exemplify that a mix of factors can drive insurance rates, which we’ll discuss more in the next section.
When it comes to the level of property insurance cost, rather than rate of change, we see different metros on top, with a wide
range around the average (see Table 2). Many of the metros with the highest median insurance expense are in Florida and
California. These metros tend to have higher value properties per unit, and many are also in states that have been experiencing
repeated climate-related disasters, namely hurricanes and wildfires.
Table 2. Top (left) and bottom (right) multifamily metros by 2022 insurance cost
1
METRO INSURANCE ($/UNIT) METRO INSURANCE ($/UNIT)
San Francisco 1086.83 Tucson 249.01
New Orleans 1019.74 Phoenix 252.03
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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Miami
1004.06
San Bernardino/Riverside
310.84
New York Metro
1002.45
Cleveland
312.23
Westchester
889.96
Columbus
313.84
Palm Beach
861.22
Las Vegas
316.93
Fort Lauderdale
814.41
Salt Lake City
329.44
Long Island
706.34
Richmond
329.85
Houston
690.86
Albuquerque
339.95
Northern New Jersey
669.25
Greensboro/Winston-Salem
341.38
Boston
614.14
Orange County
342.73
Oklahoma City
609.64
Charlotte
356.71
Tampa-St. Petersburg
607.17
Pittsburgh
361.10
Memphis
585.88
Milwaukee
365.74
Oakland-East Bay
581.49
Sacramento
366.71
Fort Worth
580.47
Dayton
367.66
Central New Jersey
566.90
Knoxville
370.56
Jacksonville
554.86
Suburban Virginia
379.06
Dallas
551.76
Indianapolis
379.61
Tulsa
545.95
Detroit
380.93
Source: Moody’s Analytics CRE.
Note:
1
Median insurance cost per unit for metro.
A Variety of Factors Drive Insurance Trends
We know that many factors affect the insurance market, interacting to drive insurance premiums. Among others, these factors
include general inflation, social inflation, litigation, increasing frequency and severity of natural catastrophes, liquidity in the
insurance capital markets, and the responses of reinsurers and regulators to these factors.
Firstly, general inflation has been affecting many aspects of the US economy, as prices continue to increase. However, as RMS
explains, the impact of inflation on insurance premiums is driven by more nuanced factors than the price of general goods typically
captured by the Consumer Price Index. A more informative metric might be something like the Producer Price Index which shows
that residential construction costs have generally been rising faster than the general inflation. However, this index is also highly
volatile, reflecting the nuanced supply chain challenges and demand fluctuations specific to construction materials. As inflation of
construction materials leads to higher insurance payouts, this is likely to affect insurance pricing over time. Although it’s unclear
how year-over-year fluctuations of a construction index like the Producer Price Index will take hold on a long-term basis. This type
of inflation also affects insurers through its impact on reinsurers, potentially leading to a lag time for it to thoroughly get priced in
by primary insurers.
Another factor influencing rising insurance premiums is social inflation, which refers to the way in which insurers’ costs rise above
the rate of economic inflation. For example, in Florida, there was a “25 percent rule” which mandated that if 25% or more of a roof
is deemed damaged, the entire roof must be replaced. While the rule has since been amended, it did contribute to “loss creep,” in
which insurance payouts end up being higher than one would expect purely looking at storm damage. However, rules like this also
pave the way for a bustling litigation landscape. In fact, Florida’s Office of Insurance Regulation points to insurance fraud as a key
driver of rising insurance premiums. The state only has about 9% of insurance claims in the nation, but has over 76% of property
insurance lawsuits. From outright fraud, such as claiming a roof is storm damaged when it's really just aging, to more nuanced
litigation around proving whether or not 25% of a roof has been storm damaged, these issues play a large role in the Florida
insurance market. Detailed analysis of various risk drivers can start to parse out the impact of social inflation on increasing insurers’
loss ratios and in turn rising premiums.
Accelerating growth in claims from climate-related hazards is also contributing to this rise in insurance premiums, and the ramp
up in insurance costs does appear to follow closely with the cost of billion-dollar-plus loss events in the US (see Figure 3). The
impact on insurance costs appears particularly acute in states like California and Florida with substantial exposure to repeated
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
6
extreme events. These states’ five-year average loss ratios for homeowners insurance are 117% and 80% respectively. In California,
property & casualty insurers and their reinsurers had $36 billion in losses from the 2017 and 2018 wildfires, with their 2017 loss
ratio over 200%. Insurers are also pulling out of these highly exposed areas, further complicating the market. For example, State
Farm will no longer write new home or business property insurance policies, and Allstate stopped selling new homeowners
insurance policies in 2022. These challenges around insurance availability are interacting with other factors like affordability and
local amenities which drive migration and development to certain areas, which in some cases continue to have a growing demand
that has not yet significantly been curbed by these growing challenges.
Figure 3 Multifamily insurance costs and US natural disasters
Sources: NOAA National Centers for Environmental Information (NCEI), Moody’s Analytics CRE, Moody’s Analytics CMBS.
The structure of an insurance market also influences the availability and affordability of insurance, interacting with the impacts of
extreme events. For example, much of the Florida insurance market is composed of small, non-diversified insurance companies.
From April 2022 through May 2023, seven of Florida’s local property insurers went insolvent, and 24 are on the regulatory
watchlist. These local companies face substantial loss when a major hurricane hits, given the concentration of their business
activities. They in turn rely heavily on reinsurance, which is facing similar challenges and are also increasing their premiums
accordingly, which in turn further challenges the primary insurers. Due to current market conditions, some reinsurers may have
large unrealized losses on their fixed income investments as interest rates rise. This can present liquidity risk if severe catastrophes
do occur.
Moody’s Investors Service summarizes these various pressure points for insurers, writing that “Weak sector profitability in recent
years from above average catastrophe losses, inflationary pressures, a focus on the impact of climate change on catastrophe event
frequency, strong demand from ceding companies and tight supply conditions in the collateralized retrocessional market all point
to higher pricing in the months ahead.”
Unpacking One Driver of Rising Premiums: Climate Hazard Exposure
Leveraging the expertise and analytical tools of Moody’s RMS for catastrophe modeling and climate data (see box regarding data
and methodologies), we dug deeper into the relationship between acute climate risk exposure and insurance expenses. As
discussed above, there is ample anecdotal evidence to support such a relationship, but given the multitude of factors driving
insurance costs, it is not a clear-cut relationship. This final section of our report examines the relationship between climate hazard
risk and both the level and the growth rate of insurance expenses for property owners.
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Average Multifamily Insurance Cost/Unit
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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We overlayed the data on properties’ insurance premiums with data on the estimated damage from their modeled exposure to
acute climate-related hazards (floods, hurricanes and wildfires). We did not see an obvious correlation between the growth rate of
insurance premiums since 2017 and the estimated acute climate risk. However, we did find that the properties with the highest
insurance premiums tend to have higher estimated damage from climate hazards (see Figure 4). We show only trends for retail
properties here, but this trend holds for all property types. See the Appendix for equivalent charts for the other core property
types.
Figure 4 Median insurance premium by year for retail properties grouped by their acute climate risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note: 1 We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods. To see equivalent charts for the other four property types, refer to the Appendix.
This trend also persists when we normalize for property value (as proxied by gross revenue of the property). Figure 5 shows the
median insurance expense as a share of gross property revenue. While the insurance expense as a share of revenue fluctuated over
the last five years by climate risk group, it remained substantially higher for the group of properties with the highest exposure to
acute climate hazards.
Insurance premiums are often sized by the value and revenue of a CRE property, and higher value and revenue CRE properties are
often located in coastal areas with higher acute climate risk. However, insurance costs have also been consistently higher as a
share of revenue for the highest climate risk properties.
Figure 5 Median insurance premium as share of gross revenue for retail properties grouped by their acute climate risk
1
Sou
rces: Moody’s Analytics CRE, Moody’s Analytics RMS.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods. To see equivalent charts for the other four property types, refer to the Appendix.
When we unpack the relationship between type of acute hazard exposure and insurance premiums, we find that hurricane
exposure has the clearest relationship to insurance expense. In most property types when we bucket properties by their
hurricane average annual damage (AAD) estimates, those properties in the highest bucket show the highest insurance expenses
consistently for the past five years. Figure 6 illustrates this trend for the hotel sector.
Figure 6 Median insurance premium by year for hotel properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes. To see equivalent
charts for the other four property types, refer to the Appendix.
Once again, this trend holds even when normalizing for value, by looking at the insurance expense as a share of revenue in Figure
6. Anecdotal evidence suggests that hurricane exposure is a driving force behind increasing insurance premiums along the Gulf
Coast, as discussed previously. Figure 6 does show substantial volatility in insurance premiums’ share of revenue, and it isn’t
consistently trending upward as one would expect. This reflects that both insurance markets and property markets are in flux and
do not
necessarily change in pace with one another.
Figure 7 Median insurance premium as a share of gross revenue for hotel properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes. To see equivalent
charts for other property types, refer to the Appendix.
The trends for multifamily follow a similar pattern but are not quite as clear cut. When looking at both median insurance premium
(Figure 8) and median insurance premium as a share of revenue (Figure 9) those properties with no modeled hurricane risk are in
the bottom of the insurance expense, but those in the highest hurricane risk only appear on top when normalizing for value by
looking at insurance cost as a share of revenue.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
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Figure 8 Median insurance premium by year for multifamily properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes. To see equivalent
charts for other property types, refer to the Appendix.Median insurance premium as share of gross revenue for multifamily properties grouped by their hurricane risk
1
Figure 9 Median insurance premium as share of gross revenue for multifamily properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods. To see equivalent charts for other property types, refer to the Appendix.
For hotels, office and retail we find that the metro with the highest median hurricane AAD has the highest median insurance
expense in 2022 (see Table 3). For retail this is true of the several top metros. The top metros for both insurance expense and AAD
occur in Florida.
Table 3. Metros / property type combinations with the highest average insurance costs in 2022
PROPERTY TYPE
METRO
MEDIAN INSURANCE EXPENSE
MEDIAN HURRICANE AAD
Retail Miami 1.64 ($/ sq ft) $5,082
Office Fort Lauderdale 1.61 ($/sq ft) $4,628
Hotel Fort Lauderdale 1435.86 ($/unit) $5,072
Source: Moody’s Analytics CRE.
Takeaways
This nascent research into property insurance trends demonstrates that insurance premiums are increasing, faster than years prior.
The rate of increase skews higher for most properties, and some metros are experiencing insurance expense increases much
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
10
greater than their average rent growth. We also see that, while there are many factors at play driving these trends, higher climate
risk generally equivocates to higher insurance cost per square foot or per unit. We also found that hurricane risk exposure was the
strongest differentiator of insurance costs among acute climate risks.
Many questions remain and this lays the groundwork for further research including exploring the time horizon that insurers may be
factoring climate risk into underwriting, separating catastrophe insurance out from other insurance, assessing the relationship with
NOI and conducting more detailed state level analysis relative to state insurance legislature policies. This also underscores the
need for solutions in the insurance industry, that best manage the desire for development with the reality that much of this
development is in areas that will be repeatedly hit by devastating hazards. This is an area of active exploration in the market and is
a topic we’ll continue to monitor closely.
Appendix
Table 4. Top (left) and bottom (right) metros for 2017-2022 insurance expense and rent CAGR for Retail
1,2
METRO INSURANCE CAGR RENT CAGR METRO INSURANCE CAGR RENT CAGR
Austin
11.9%
0.8%
Cleveland
2.6%
0.3%
Suburban Maryland
11.1%
0.9%
Detroit
3.3%
0.5%
San Antonio
11.0%
1.3%
San Diego
3.6%
0.7%
Dallas
10.8%
0.7%
Chicago
4.8%
0.8%
Palm Beach
10.5%
1.2%
Tampa-St. Petersburg
4.9%
0.4%
Methodology
Insurance Data
Moody’s collects CMBS property income, expense, reserve and capital expenditure data in CRE Financial Council Investor
Reporting Package format. The dataset contains more than 114,000 loans and 123,000 properties spanning back to the early
1990s. This dataset provides one data point covering all of a property’s insurance expenses. Thus, while this analysis focuses on
factors related to property and casualty insurance we are not able to parse out different types of insurance coverages.
For this analysis we focused on the past 20 years and looked specifically at multifamily, hotel, office, retail, and industrial
(which includes self-storage and warehouses) properties. We cleaned the dataset by removing outliers and adjusting for
incomplete data. This included annualizing statements that do not cover a full year using respective statement start & end dates.
We cleaned overlapping statement periods to construct property-level annual insurance expense series (at a monthly frequency),
interpolating as needed. We calculated national insurance expense indices for each property type by averaging these property-
level series. For metro level analysis we only included metros with at least twenty properties in our database with data for both
2017 and 2022 so as not to skew the results with outliers.
Climate Data
For the climate risk portion of our analyses, we used data from Moody’s Climate on Demand. Climate on Demand characterizes
physical climate risk through exposure scores for six climate hazards that are the most common climate-related hazards that can
result in significant business risk: flooding, heat stress, hurricanes & typhoons, sea level rise, water stress and wildfires. Climate on
Demand includes Average Annualized Damage (AAD), an estimate of the long-term damage, including physical damage,
downtime, increased operating costs and reduced productivity, that an asset faces due to each climate hazard. To inform the
Climate on Demand AAD estimate users can input replacement cost of the building and its contents combined with a measure
of net annual revenue. For this analysis, since we don’t have this detailed data for each property, we used $1 million of property
replacement cost as the exposed value to enable comparisons between assets in relative terms. Thus, in this report AAD is in
units of dollars, assuming a million dollars of exposure, with exposure defined as the combination of replacement cost and net
annual revenue for the site. We focused on the AAD values for acute climate hazards most likely to influence insurance costs in
the near term, including floods, wildfires and hurricanes. Climate on Demand offers RCP 4.5 and 8.5 and several time horizons
including 2020, 2030, 2040, 2050, 2075 and 2100. For this analysis we used RCP 8.5 and 2050.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
11
Fort Worth
9.9%
0.4%
Baltimore
5.5%
1.1%
St. Louis
9.8%
Raleigh-Durham
5.7%
1.1%
Suburban Virginia
9.4%
0.3%
Charlotte
5.8%
1.1%
Fort Lauderdale
9.1%
0.4%
Phoenix
6.0%
0.6%
Denver
9.0%
0.4%
Fresno
6.2%
-0.1%
Columbus 9.0% 0.7% Atlanta 6.2% 0.7%
Greenville 8.9% 0.3% Las Vegas 6.4% 0.6%
Orlando
8.6%
1.0%
Oakland-East Bay
6.4%
0.9%
Pittsburgh
8.6%
0.8%
Kansas City
6.6%
0.2%
Norfolk/Hampton Roads
8.5%
0.5%
Indianapolis
6.8%
0.3%
Houston
8.4%
1.1%
Orange County
6.8%
0.6%
Los Angeles
8.2%
0.9%
Philadelphia
7.1%
0.5%
Boston
8.1%
0.7%
New Orleans
7.4%
0.3%
San Bernardino/Riverside
8.0%
0.1%
Birmingham
7.4%
0.6%
New York Metro
7.8%
Miami
7.5%
1.4%
Source: Moody’s Analytics CRE
Notes:
1
To obtain the median CAGR by metro we calculated the CAGR for each property with an insurance value in 2017 and 2022 and then took the median of that sample. See the
Appendix for the highest and lowest CAGRs and insurance prices for the other four property types.
2
To obtain rent CAGR we used average metro level rent growth from 2017 through
2022.
Table 5. Top (left)and bottom (right) retail metros for 2022 insurance cost
1
METRO INSURANCE ($/SQ FT) METRO INSURANCE ($/SQ FT)
Miami
1.64
Cleveland
0.21
Palm Beach 1.33 Detroit 0.25
Fort Lauderdale
1.32
Columbus
0.26
New York Metro
1.23
Raleigh-Durham
0.27
New Orleans
1.17
Charlotte
0.29
Tampa-St. Petersburg
0.87
Phoenix
0.30
Orlando
0.81
Pittsburgh
0.30
Houston
0.73
Suburban Virginia
0.32
Northern New Jersey 0.70 Greenville 0.32
San Antonio
0.62
Birmingham
0.34
Dallas
0.56
Atlanta
0.34
Denver
0.54
Indianapolis
0.35
Oakland-East Bay
0.54
Fresno
0.36
Los Angeles
0.52
Baltimore
0.36
Boston 0.51 Kansas City 0.37
Fort Worth 0.50 Las Vegas 0.39
Philadelphia
0.50
Chicago
0.40
Austin
0.49
San Diego
0.40
San Bernardino/Riverside
0.48
Norfolk/Hampton Roads
0.42
Orange County
0.46
Suburban Maryland
0.44
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
12
Source: Moody’s Analytics CRE.
Note:
1
Median insurance cost per square foot for metro.
Table 6. Metros in descending order of 2017-2022 insurance expense and rent CAGR for industrial
1, 2, 3
METRO
INSURANCE CAGR
RENT CAGR
Las Vegas
12.0%
4.9%
Dallas
11.3%
4.0%
Oakland-East Bay
11.1%
4.8%
Philadelphia
9.7%
4.5%
New York Metro
9.7%
2.0%
Houston
9.6%
4.3%
San Bernardino/Riverside
8.7%
12.8%
Denver
8.6%
3.8%
San Antonio 8.5% 2.8%
Chicago 8.2% 3.4%
Orange County
7.5%
5.3%
Tampa-St. Petersburg
6.3%
3.6%
San Diego
5.8%
4.8%
Los Angeles
5.7%
8.3%
Atlanta
2.0%
4.3%
Detroit
1.8%
3.3%
Source: Moody’s Analytics CRE
Notes:
1
To obtain the median CAGR by metro we calculated the CAGR for each property with an insurance value in 2017 and 2022 and then took the median of that sample. See the
Appendix for the highest and lowest CAGRs and insurance prices for the other four property types.
2
To obtain rent CAGR we used average metro level rent growth from 2017 through
2022.
3
For industrial properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s Analytics CRE database, so rather than showing top and
bottom twenty metros we show them all in descending order.
Table 7. Industrial metros in descending order of 2022 insurance cost
1, 2
METRO INSURANCE ($/SQ FT)
New York Metro
0.59
Tampa-St. Petersburg
0.47
Orange County
0.36
Houston
0.35
Dallas
0.32
San Diego
0.27
San Antonio
0.26
Denver
0.26
Los Angeles 0.25
Oakland-East Bay 0.24
San Bernardino/Riverside
0.23
Detroit
0.23
Las Vegas
0.21
Chicago
0.17
Philadelphia
0.15
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
13
Atlanta
0.13
Source: Moody’s Analytics CRE.
Notes:
1
Median insurance cost per square foot for metro.
2
For industrial properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s
Analytics CRE database, so rather than showing top and bottom twenty metros we show them all in descending order.
Table 8. Metros in descending order of 2017-2022 insurance expense and rent CAGR for office
1
METROS
INSURANCE CAGR
RENT CAGR
Dallas
9.0%
2.1%
Los Angeles
8.6%
2.2%
Orange County 7.7% 1.1%
Pittsburgh
7.6%
1.2%
New York Metro
7.4%
0.8%
Houston
7.3%
0.3%
Central New Jersey
6.9%
1.1%
Suburban Virginia
6.7%
1.3%
San Jose
6.6%
2.5%
Fort Lauderdale
6.6%
1.7%
Philadelphia
6.6%
1.3%
Indianapolis 6.5% 1.6%
Atlanta
6.5%
2.3%
San Diego 6.2% 2.1%
Denver
6.0%
2.1%
Detroit
6.0%
1.0%
Phoenix
5.9%
2.2%
Chicago
5.4%
1.1%
San Francisco
5.4%
1.8%
Northern New Jersey
4.5%
0.8%
Source: Moody’s Analytics CRE
Note:
1
For office properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s Analytics CRE database, so rather than showing top and
bottom twenty metros we show them all in descending order.
Table 9. Office metros in descending order of 2022 insurance cost
1,2
METRO
INSURANCE ($/SQ FT)
Fort Lauderdale
1.61
San Francisco
1.06
San Jose 0.98
New York Metro
0.82
Houston
0.54
Los Angeles
0.53
Orange County
0.44
San Diego
0.40
Northern New Jersey
0.38
Chicago
0.36
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
14
Philadelphia
0.34
Pittsburgh
0.34
Suburban Virginia
0.33
Denver
0.33
Central New Jersey 0.31
Las Vegas
0.29
Detroit
0.27
Seattle
0.27
Indianapolis
0.25
Dallas
0.25
Atlanta 0.24
Phoenix
0.23
Cleveland
0.22
Source: Moody’s Analytics CRE.
Notes:
1
Median insurance cost per square foot for metro
2
For office properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s Analytics
CRE database, so rather than showing top and bottom twenty metros we show them all in descending order.
Table 10. Metros in descending order of 2017-2022 insurance expense and rent CAGR for hotel
1,2
METROS
INSURANCE CAGR
ROOM RATE CAGR
Minneapolis
12.0%
1.2%
Phoenix
11.6%
5.5%
San Diego
10.3%
4.8%
San Jose
10.0%
-3.9%
Orlando
8.5%
4.0%
Los Angeles 8.5% 2.2%
Raleigh 8.4% 2.5%
Fort Lauderdale
8.1%
3.7%
District of Columbia
7.6%
Chicago
7.5%
1.6%
Indianapolis
7.3%
1.9%
Nashville
7.2%
3.3%
Anaheim
7.2%
5.1%
New York Metro
6.5%
1.6%
Atlanta
6.2%
1.9%
Fort Worth 6.1% 2.6%
Seattle
6.0%
0.3%
Detroit
5.6%
1.3%
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
15
Virginia Beach
5.3%
4.3%
Dallas
5.1%
2.0%
Houston
4.0%
-1.0%
Philadelphia
3.1%
2.4%
Charlotte
1.5%
1.7%
Source: Moody’s Analytics CRE
Notes:
1
For hotel properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s Analytics CRE database, so rather than showing top and
bottom twenty metros we show them all in descending order.
2
Room rate is not available for every metro.
Table 11. Hotel metros in descending order of 2022 insurance cost
1,2
METRO
INSURANCE ($/UNIT)
Fort Lauderdale
1435.86
Los Angeles
1018.29
New York Metro 1003.77
Anaheim
893.73
Seattle
780.44
Orlando
780.21
San Jose 727.21
Houston
624.38
San Diego
605.36
Philadelphia
597.42
Fort Worth 583.87
Phoenix
563.73
Dallas
518.28
Chicago
453.75
Nashville 449.89
Virginia Beach
443.50
District of Columbia
430.85
Indianapolis
422.57
Minneapolis 404.78
Atlanta
393.53
Detroit
329.59
Raleigh
313.21
Charlotte 309.13
Source: Moody’s Analytics CRE.
Notes:
1
Median insurance cost per unit for metro.
2
For hotel properties there is not substantially more than 20 metros that have 20 or more properties in the Moody’s Analytics CRE
database, so rather than showing top and bottom twenty metros we show them all in descending order.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
16
Figure 10 Median insurance premium by year for hotel properties grouped by their acute climate risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods.
Figure 11 Median insurance premium by year for multifamily properties grouped by their acute climate risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods.
Figure 12 Median insurance premium by year for industrial properties grouped by their acute climate risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
17
Figure 13 Median insurance premium by year for office properties grouped by their acute climate risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes, wildfires and
floods.
Figure 14 Median insurance premium by year for retail properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes.
Figure 15 Median insurance premium by year for industrial properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
18
Figure 16 Median insurance premium by year for office properties grouped by their hurricane risk
1
Sources: Moody’s Analytics CRE, Moody’s Analytics RMS.
Note:
1
We grouped properties into quintiles based on the sum of their Moody’s RMS Climate on Demand (CoD) average annualized damage (AAD) scores for hurricanes.
MOODY’S ANALYTICS INSURANCE COSTS TRENDS BECOMING A HEADACHE FOR THE CRE MARKET
BX19737
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