Rising sea levels and more intense storms are changing the landscape for commercial property insurance, especially in coastal areas. Insurers are now taking a more cautious approach to their policies, with significant impacts being felt from Connecticut to northern Maine. Tony O’Donnell, a senior vice president at Jencap, highlights that the effects of climate change are no longer just theoretical; they are influencing pricing and coverage decisions in real-time.
One notable change is the increase in wind deductibles for properties located in vulnerable areas. For example, properties on exposed barrier islands may now face deductibles ranging from 3% to 5%, while those in more sheltered coastal locations might see deductibles of 1% or 2%. O’Donnell points out that policies are increasingly separating standard windstorm deductibles from those for named storms, with the latter sometimes doubling in cost.
Flood risks have also shifted as updated FEMA flood maps have reclassified many areas. Properties that were once considered safe from flooding may now require mandatory flood insurance, either through the National Flood Insurance Program or private coverage. This change can lead to new financial obligations for property owners, depending on their location and elevation.
In addition to wind and flood risks, insurance companies are now paying more attention to hail damage, which was previously less of a concern in the Northeast. O’Donnell notes that some policies are now including exclusions for cosmetic damage resulting from convective storms, reflecting a broader understanding of potential weather-related losses.
Winter weather is also impacting insurance pricing. The risk of ice damming during Nor’easters has increased, leading to water damage claims that can affect multiple units in a building. Insurers are responding by introducing per-unit water damage deductibles, which add another layer of complexity to property coverage.
As traditional insurers like Travelers and Hartford pull back from insuring coastal properties, brokers like Jencap are stepping in to fill the gap, albeit with higher deductibles and more restrictions. O’Donnell emphasizes that while the market has seen two years of rising prices and reduced capacity, there are signs of stabilization, with more options becoming available.
Insurers are also focusing on financial stability, working only with A-rated carriers to ensure reliability. Clients are adjusting their strategies as well, often choosing to retain more risk to keep premiums manageable. This can mean accepting higher deductibles or specific exclusions, as long as they comply with mortgage requirements.
Emerging risks are also shaping the insurance landscape. Clients are now seeking coverage for unusual climate impacts, such as weather-related event cancellations or snow overage insurance for condominium boards. This shift indicates a growing recognition of the varied ways climate change can disrupt operations and finances.
The evolving nature of climate risk in commercial insurance is pushing brokers and clients to rethink their coverage needs. As they face new challenges, the focus is on finding the right balance between adequate protection and manageable costs.