Property insurance renewals mean good news for most

Editor’s note: This is a two-part series on the current state of property insurance rates for hotel owners. In part one, Hotel Investment Today spoke to insurance brokers. In part two, we will talk to hotel owners and asset managers.

NATIONAL REPORT — In 2023, as weather-related catastrophic events over the previous years created a “perfect storm” of factors, hotel owners were getting bad news and massive increases when it came time for property insurance renewals.

Two years later, hotel owners, especially ones who don’t have any losses on their books, are getting much better news.

Andrew Haake

“The market has absolutely turned in a positive way for property insurance,” said Andrew Haake executive vice president – Midwest for Kansas City-based insurance broker Lockton. “[Before that] we were seeing 20% increases,” he said. “We started to see single-digit increases and even some moderate decreases [last year]…. This year, we started to see some more capacity in the marketplace.”

In the past few years, the capacity of insurers for hotels was restricted as many decided to leave the marketplace. Insurance companies will often buy what’s called “reinsurance” to get more capacity without necessarily increasing their exposure. Last year, more capacity came into the market, and this year, for January 1 renewals, a lot more capacity (meaning competition) came back. The result is most owners are seeing their property insurance rates decrease, Haake said.

I’m shocked by how much the markets turned in one year. Most of the renewals are happening right now in hospitality, so everybody should be experiencing really good things.

Andrew Haake

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“I’m shocked by how much the markets turned in one year,” he said. “Most of the renewals are happening right now in hospitality, so everybody should be experiencing really good things.”

Sean Murphy, senior director and vice president of Hospitality for insurance broker Rolling Meadows, Illinois-based Arthur J. Gallagher & Co., said this good news is happening despite the fact that 2024 was almost just as active as 2023 in terms of $1 billion insurance loss events.

“This year, I have insurers saying I want to participate for more and I want to give you a larger share,” he said. “It’s going back to simple supply and demand. The supply is up. The demand is still there, and we’re seeing that, in some cases, pricing is being reduced because of that. Everyone wants to maintain their book of business.”

While the news isn’t as good for owners with insurance losses, the news isn’t nearly as bad as it’s been in years past.

“If you have losses, you’re seeing flat to down 5% to 10%,” Haake said. “If you have no losses, we’re seeing people anywhere from 10% to, in some cases, 50% down.”

Why the market improved

So why is the market better in 2025? Murphy said it’s based on premium and rate levels.

With rates really peaking in 2023, there was enough money to absorb all those capital events. At the insurer level, there weren’t many reinsurance losses in 2024 so the insurers took them net on their balance sheet, but they had enough premium in the bucket to absorb those without any issues. When they renewed their insurance, they got a reduction, so they’re not paying as much.

Sean Murphy

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“With rates really peaking in 2023, there was enough money to absorb all those capital events. At the insurer level, there weren’t many reinsurance losses in 2024. So, the insurers took them net on their balance sheet, but they had enough premium in the bucket to absorb those without any issues,” he said. “When they renewed their insurance, they got a reduction. So, they’re not paying as much.”

Haake said general liability insurance still tends to be a pain point for owners as it’s seeing anywhere from a 5% to 15% increase. But, for the most part, Haake said hotel owners are seeing savings right now when they were most likely budgeting in a double-digit increase for property insurance.

“If I was giving them advice six months ago, I would say probably flat to 10% increase,” he said. “Some of that’s just me protecting myself, but that’s where the market was. But it’s migrated in the last five to six months and we’re seeing significant savings across portfolios. That’s good news, and everybody likes good news.”

Another key to the decreases, Haake said, is hotel owners’ being flexible with taking on a higher deductible or different risk finance mechanisms. It also means that both reinsurers and regular insurers finally got to a rate where everybody was making money again. So, the new capacity is really a function of other insurers raising rates over time.

“Even though it’s not apples to apples, it does create competition, and that’s where we’re seeing it go from a 10% discount to 20-40%,”  he said. “We’re seeing the incumbent carriers really work aggressively to save that client.”

Geography still matters

A few years ago, geography in a hotel owner’s portfolio made a big difference in terms of the cost of the policy (for example, portfolios that had a heavy mix of properties in Florida, especially ones that multiple hurricanes have hit in the past). This caused owners to make tough decisions like not fully covering their portfolio because they couldn’t afford the premiums. With more competition in the market, those problems have largely been solved.

“The people saving the most are portfolios that have a nice diversification of risk and without losses,” Haake said. “The capacity creates the competition… If you have an-all Florida portfolio, you’re still going to be challenged, just from a cost perspective. It’s still high, but compared to where we were a year ago and two years ago, there is plenty of capacity in the marketplace.”

When the insurance markets were more challenging, Haake said insurers scrutinized the building quality and data within that portfolio. He said he’s urging owners to use this good news to improve that information.

Sean Murphy

“What I’m telling all our groups is, take this pause or this good news, but still work really hard to make sure you have solid data,” he said. “If you’re in a hurricane zone: What material is your roof built from? Does it have tie-down straps?”

Haake also urges his clients to get creative.

“Creating competition doesn’t mean just the same structure going forward,” he said. “If you can do an alternative structure, it allows you to get quotes that, all of a sudden, you can use as a bargaining chip against the actual program structure in place… This program, which has a higher deductible, is an option we leverage. You have to get that option in order to leverage the current structure and be able to drive that cost down.”

Murphy said it’s a net benefit for owners who are willing to put more skin into the game.

“Now both sides are saying, well, if I take a $100,000 or $250,000 [deductible], now, all of a sudden, that may not necessarily instantly reduce price, but what it does is increase the supply of [insurers] that are saying now I’m interested.

“So, taking the deductibles up, either on straight deductible or some on the ownership side, they can take plus aggregates, and so they build in a kind of a fund, or, insulation for the insurers to buffer them from taking the smaller claims.”

Murphy said owners are using a mixed approach in figuring out how to save money on insurance, like using plug aggregates or parametric coverage as alternatives.

“Some of those deductible and aggregates were implemented maybe last year as a way to defer some of the increase,” he said. “This year, we’re not seeing the market necessarily give away terms and conditions. We’re not there yet in the market cycle. So, we’re not talking about lowering deductibles and getting back a bunch of coverage that we didn’t have last year… If you had to add some of those smaller claims, you can use that deductible as a strategy to get more capacity.”