Insurance Challenges for Habitational Businesses

Habitational real estate property owners face a tough renewal season ahead as property and casualty coverage rates are expected to increase this year. Weather-related losses hurt insurers with underpriced property rates during the past year as wind, tornadoes, and hail damage were all compounded by shrinking capacity. This ended up forcing Habitational Insurance rates to climb higher in 2020.

We run down a list of challenges to be aware of in this tightening habitational insurance market to help insurers and businesses alike assess these risks and move forward responsibly.

Insurance Challenges for Habitational Businesses

With a potential decrease in market capacity, real estate managers may face spiking insurance rates. Property owners also face difficult market placement, in some situations facing non-renewals. In risks with losses, insurers are increasing rates by an average of 40 percent. While the habitational industry saw flat property rates for some time in 2020, these increases may be difficult to manage without moving costs on to tenants and clients. Furthermore, these market swings will potentially affect the market valuation of commercial properties.

Liability Claims

The habitational casualty market is troubled by rate increases and capacity limitations after a decade of losses, which have only gotten worse in the last several years. A variety of markets have ceased offering general liability and excess coverage as rates have risen sharply.

Another issue facing building owners is the rising sums of money (judgments) awarded to liability claimants. In today’s litigation market, it’s not uncommon to see persons injured on premises at grocery stores or apartment buildings receive settlements in the tens of millions of dollars after claiming pain and suffering at the building owner’s expense. From slippery floors to faulty wiring, judgments are favoring claimants more than ever, with much higher payouts than before. Several insurers have pointed to increased jury settlements as causing a social inflation, opening the door to an increase in claim reserves.


The habitational property market is becoming a significantly more challenging market following years of softening driven by significant inflows of new capital from investors seeking higher returns. Loss experience is driving things here as insurers focus on improving profitability by reducing capacity and emphasizing underwriting discipline.

As rates have risen, traditional markets are regaining interest at much higher rates. New insurers are also moving into the market, but there may not be the capacity to fill the gap. Through the end of last year, coverage options became scarcer, particularly among a shaky economy due to COVID-19.

Steps to Limit Risk in Habitational Exposures

In today’s market, it’s crucial for habitational businesses and insurance providers to work together to understand the real estate risks. Carriers might begin limiting their exposure by offering reduced property limits and/or liability coverage or excluding certain kinds of coverage in 2021.

With a tightening market for habitational risk, a solid risk management plan that features the strengths of a habitational account to underwriters becomes more important. When habitational businesses provide their insurance carriers with extended loss histories, discussing key risk management techniques that an organization is implementing, and featuring strong management techniques can be the difference between a satisfactory insurance placement and one that provides broader coverage that maximizes the investor’s financial standing.

About Mavon Insurance

At Mavon Insurance, we pride ourselves on our unique approach to insurance. We focus on integrity, communication, professionalism, respect and gratitude to help our clients succeed, and place business in specialized markets. For more information about our products, or to become an agent, contact us today at (855) 248-1480.