NEW YORK, NY – For the first time in seven years, commercial property insurance premiums declined in Q2 2024, marking a historic shift in a market that has relentlessly punished businesses with double-digit rate increases since 2017. According to the Insurance Information Institute and Marsh's Global Insurance Market Index, this rate reversal signals the beginning of a soft market cycle that could deliver substantial savings for businesses—if they know how to capitalize on it.
The decline follows years of catastrophic losses from hurricanes, wildfires, severe convective storms, and other natural disasters that drove premiums up 40-60% or more for many properties between 2017 and 2023. Insurers lost billions, tightened underwriting, reduced capacity, and aggressively raised rates. But by 2024, several factors converged: improved underwriting margins, increased insurer capacity, moderating catastrophe losses in some regions, and intense competition for market share.
For commercial property owners, this creates the best opportunity in years to renegotiate coverage, reduce premiums, and secure improved terms. However, the soft market isn't universal—properties in high-catastrophe-risk areas still face rate increases, while those in lower-risk regions are seeing the most significant reductions.
Understanding the Seven-Year Hard Market
To appreciate the significance of the current market shift, it's essential to understand what drove the prolonged hard market from 2017-2023.
Catastrophic Losses Mounted
$51 billion in tropical storm damages in 2024 alone, with hurricanes Milton and Helene accounting for the majority. But catastrophe losses have been consistently elevated for years:
2017: Hurricane Harvey, Irma, Maria caused $125+ billion in insured losses 2018: Camp Fire (California) and Hurricane Michael totaled $30+ billion 2020: Record hurricane season with Laura, Zeta, Delta causing $20+ billion 2021: Hurricane Ida, severe convective storms: $75+ billion 2022: Hurricane Ian: $50+ billion 2023: Maui wildfires, severe storms, flooding: $70+ billion
Seven consecutive years of elevated catastrophe losses forced insurers to dramatically raise rates to restore profitability. Combined ratios (claims + expenses / premiums) exceeded 100% for many commercial property writers, meaning they paid out more than they collected—an unsustainable situation.
Reinsurance Costs Exploded
Insurers buy reinsurance (insurance for insurers) to protect against catastrophic losses. As catastrophe losses mounted, reinsurers raised prices dramatically—in some cases tripling rates between 2020 and 2023.
Insurers passed reinsurance costs to policyholders: When an insurer's reinsurance costs double, premiums must rise significantly to maintain profitability. Commercial property policyholders bore the brunt of this cost escalation.
Capacity Contracted
Many insurers reduced commercial property exposure, particularly in catastrophe-prone areas:
Florida, California, Louisiana, and coastal markets saw insurers exit entirely or drastically reduce capacity. Properties that previously had 10 carriers competing for their business might have only 2-3 options.
Reduced competition drove prices up: When fewer insurers compete for business, prices rise. In the hardest-hit markets, businesses faced 40-80% premium increases and dramatically reduced coverage terms.
Why Rates Are Finally Declining
Improved Underwriting Margins
Combined ratios for commercial property improved to 98-102 by late 2023/early 2024, down from 105-110 in 2020-2022. This means insurers are approaching or achieving profitability on underwriting (before investment income).
Carriers rebuilt profitability after years of losses: The rate increases of 2017-2023 finally offset claim cost increases. Insurers no longer need aggressive rate increases just to stop losing money.
Sustainable pricing achieved: Insurers have reached rate levels that adequately cover expected losses plus expenses and profit margins. They can now compete on price rather than continually raising rates.
Increased Market Capacity
New capital entered the market: Following profitable years, investors deployed capital into insurance markets. New carriers launched, existing carriers expanded capacity, and reinsurers increased limits available to primary insurers.
Carriers hungry for growth: After years of rate increases that shrank policy counts, insurers want to grow market share. To do so, they must offer competitive rates.
Example: A regional property insurer that wrote $200 million in premiums in 2020 may have shrunk to $150 million by 2023 as rate increases drove clients away. To return to $200 million+, they must aggressively compete on price.
Regional Variation in Catastrophe Exposure
Not all regions face equal risk: While coastal Florida faces extreme hurricane risk, Midwest states outside tornado alleys have relatively stable property loss experience.
Low-risk properties benefiting most: Properties in areas with minimal catastrophe exposure (no hurricanes, wildfires, floods, earthquakes, or severe convective storms) are seeing the most significant rate reductions—often 10-25%.
High-risk properties still increasing: Florida, California, Gulf Coast, and wildfire-prone regions continue seeing rate increases, though the pace has slowed. A property in Miami might face a 5-10% increase vs. 30-40% in prior years.
Competitive Dynamics
Market share battles: In soft markets, insurers compete aggressively for market share, knowing they can maintain profitability even at lower rates due to improved overall market pricing.
New entrants: Insurtech companies and alternative risk solutions (including parametric insurance and captive structures) create competitive pressure on traditional carriers.
Client retention becomes priority: During hard markets, insurers focused on profitability over retention. In soft markets, retaining existing clients becomes critical, driving more favorable renewal terms.
Who's Benefiting Most from Rate Declines
Properties in Low-Catastrophe-Risk Areas
Midwest properties outside tornado alleys (Ohio, Indiana, Wisconsin, parts of Illinois): Seeing 5-15% rate decreases.
Mid-Atlantic and Northeast properties away from coasts (Pennsylvania, upstate New York, inland New England): Seeing 8-18% rate decreases.
Mountain West properties without significant wildfire exposure (Colorado Front Range, Utah urban areas): Seeing 5-12% rate decreases.
Why: These areas have stable, predictable loss experience. Insurers overpriced risk during the hard market and are now correcting, leading to meaningful reductions.
Well-Maintained Properties with Strong Risk Management
Properties with robust risk mitigation: Sprinklers, fire alarms, security systems, updated electrical/plumbing, and well-maintained roofs receive favorable pricing.
Claims-free history: Properties with no or minimal claims over 5+ years command the best rates. Insurers view them as low-risk and compete aggressively for the business.
Resilience investments: Properties that invested in hurricane shutters, wildfire-resistant roofing, flood barriers, or seismic retrofits benefit from lower rates as insurers recognize reduced loss potential.
Businesses with Leverage (Size, Quality, Negotiating Power)
Large accounts ($500K+ premiums): Have more negotiating power and attract competitive interest from multiple carriers.
Fortune 500 and national accounts: Often receive the most favorable terms as insurers view them as prestigious, stable, and desirable clients.
Multi-location portfolios: Businesses insuring dozens or hundreds of properties can negotiate package deals with volume discounts.
Who's Still Facing Rate Increases
High-Catastrophe-Risk Properties
Coastal properties (Atlantic, Gulf, Pacific coasts): Still seeing 5-15% increases in many cases, though down from 20-40% in prior years.
California properties in wildfire zones: Facing continued increases as insurers reduce wildfire exposure.
Florida properties: Rate increases persist, particularly for properties in high-wind zones or flood-prone areas.
New Orleans and Gulf Coast: Hurricane exposure continues driving rate increases.
Why: Catastrophe losses remain elevated in these areas. Even improved overall market conditions don't offset fundamental geographic risk.
Properties with Poor Loss History
Multiple claims in recent years: Properties with several losses—even small ones—face surcharges or continued rate increases. Insurers view claim history as the strongest predictor of future losses.
High-severity losses: A property that experienced a $1 million loss in the past 3-5 years will face higher rates regardless of market conditions.
Maintenance issues: Properties with deferred maintenance, older roofs, outdated systems, or fire code violations may receive rate increases or reduced coverage despite overall market softening.
Vacant or Special-Use Properties
Vacant buildings: Extremely high risk for vandalism, theft, arson, and undetected damage (burst pipes, roof leaks). Insurers charge substantial premiums and may not offer full coverage.
Special risks: Properties with unique exposures (manufacturing with hazardous materials, woodworking, etc.) continue facing tight markets.
How to Capitalize on the Soft Market: Seven Strategies
Strategy 1: Shop Your Coverage Aggressively
The soft market creates competitive opportunities: Insurers want to grow. Use that to your advantage.
Get multiple quotes: Obtain proposals from at least 4-6 carriers. In soft markets, rate variation between carriers increases—one insurer may quote 20% below your current rate.
Work with a broker: Commercial insurance brokers access multiple markets and understand which carriers are most competitive for your property type and location.
Time it right: Start the renewal process 90-120 days before expiration to allow sufficient time for carrier underwriting and negotiation.
Leverage competitive quotes: Even if you prefer your current insurer, competitive quotes provide negotiating leverage. If Carrier B quotes 15% below your renewal, show that to your current carrier and negotiate.
Example: A manufacturing property in Ohio paying $125,000 annually received renewal at $120,000 (4% reduction). After obtaining competitive quotes, they secured proposals at $105,000 and $102,000—15-18% below renewal. They negotiated their incumbent down to $108,000, saving $17,000 (13.6%).
Strategy 2: Optimize Deductibles
Higher deductibles = lower premiums: As markets soften, increasing deductibles can yield substantial premium savings.
Typical impact: Increasing a property deductible from $10,000 to $25,000 might reduce premiums by 10-15%. Increasing to $50,000 could reduce premiums by 20-25%.
When it makes sense:
- Your business has strong cash reserves to absorb higher deductibles
- Property loss history is minimal (you rarely file claims)
- You prefer to self-insure smaller losses and use insurance for catastrophic events
Calculate break-even: Determine how many years of premium savings it takes to equal the increased deductible. If increasing deductible from $10K to $25K saves $5,000 annually, you break even in 3 years if you don't have a claim.
Wind and hail deductibles: For properties in wind/hail-exposed areas, wind/hail deductibles (often percentage-based: 2%, 5%) significantly impact premiums. Increasing these deductibles can save 15-30%.
Strategy 3: Bundle Coverage
Package policies reduce costs: Insuring multiple properties or combining property with other coverages (general liability, auto, umbrella) often yields 10-20% discounts.
Monoline vs. package pricing: Buying property insurance standalone ("monoline") is typically more expensive than bundling within a commercial package policy.
Multi-location advantage: If you own properties in multiple locations, insuring all with one carrier often yields volume discounts and simplified administration.
Example: A business insuring three properties separately for $50K, $60K, and $70K ($180K total) consolidated with one carrier and received a 12% discount, reducing premiums to $158,400—a $21,600 annual saving.
Strategy 4: Invest in Risk Mitigation
Carriers reward risk reduction: Properties that implement fire protection, security, and maintenance improvements qualify for premium discounts and better coverage terms.
High-ROI improvements:
- Sprinkler systems: Can reduce premiums by 15-40% for properties previously unsprinklered
- Central station fire and burglary alarms: Often yield 5-15% discounts
- Roof upgrades: Replacing aging roofs with impact-resistant materials qualifies for discounts and improves insurability
- Electrical upgrades: Updating knob-and-tube or aluminum wiring reduces fire risk and improves rates
- Plumbing upgrades: Replacing galvanized steel or polybutylene plumbing reduces water damage risk
Document improvements: Provide insurers with receipts, photos, and certificates of completion for upgrades. Many discounts aren't applied automatically—you must request them.
Payback period: Many risk mitigation investments pay for themselves through insurance savings within 3-7 years, beyond the operational benefits (reduced losses, improved safety).
Strategy 5: Challenge Property Valuations
Overvalued properties pay excess premiums: Commercial property insurance premiums are partially based on insured values (replacement cost). If your property is overvalued, you're paying premiums on coverage you don't need.
Get an appraisal: Commercial property appraisals cost $2,000-$5,000 but can identify overvaluation that results in thousands of dollars in annual premium savings.
Common overvaluation causes:
- Outdated appraisals that don't reflect depreciation or market changes
- Inclusion of land value (insurance covers buildings and contents, not land)
- Overstated replacement costs based on outdated construction cost estimates
Example: A business insuring a warehouse for $3 million (based on a 2015 appraisal) obtained a new appraisal showing actual replacement cost of $2.4 million. Reducing insured value from $3M to $2.4M saved $8,500 annually.
Coinsurance penalties: Be careful not to underinsure. Most commercial property policies include coinsurance clauses (typically 80% or 90%) requiring you to insure to a percentage of actual value or face claim penalties. Ensure appraisals are accurate and conservative.
Strategy 6: Explore Alternative Risk Transfer
Soft markets make traditional insurance more affordable, but alternatives can still offer advantages:
Captive insurance: Businesses with sufficient premium volume (typically $500K+) and strong loss control may benefit from captive insurance companies—self-insuring through their own insurance company structure. Captives retain underwriting profit and investment income, reducing long-term costs.
Risk retention groups (RRGs): Industry-specific insurance cooperatives owned by policyholders provide customized coverage and stable pricing.
Parametric insurance: Policies that pay predetermined amounts when specific events occur (e.g., earthquake magnitude >6.5, hurricane wind speed >100 mph within 5 miles) supplement traditional coverage with rapid payouts and no claims adjustment disputes.
Self-insurance: Businesses with strong balance sheets and diversified property portfolios may self-insure for lower-severity losses (via high deductibles or retentions) and purchase insurance only for catastrophic losses.
Strategy 7: Lock in Multi-Year Terms
Guaranteed-cost multi-year policies: Some insurers offer 2-3 year policies with guaranteed premiums, protecting against future rate increases if markets harden again.
Advantages:
- Rate stability and budgeting certainty
- Protection if catastrophe losses spike and markets harden
- Reduced administrative burden (one renewal every 2-3 years vs. annually)
Disadvantages:
- If markets continue softening, you may miss further rate decreases
- Harder to switch carriers mid-term if better options emerge
- Premiums are typically higher than one-year policies to compensate insurer for rate guarantee
When it makes sense: If you believe rates have bottomed or will increase, locking in multi-year terms provides value. If you expect further softening, annual policies allow you to continue capitalizing on declining rates.
Regional Market Dynamics: Where Rates Are Softening Most
Highest Rate Declines
Ohio, Indiana, Illinois (outside Chicago), Wisconsin: Seeing 10-20% rate decreases for well-maintained properties with good loss history.
Pennsylvania, upstate New York, Vermont: 8-15% decreases common.
Mountain West (Colorado, Utah, Wyoming away from wildfire zones): 7-14% decreases.
Moderate Rate Changes
Texas (inland areas), Oklahoma, Kansas: Relatively flat to slight decreases (2-6%).
Southeast (Georgia, South Carolina, North Carolina inland): Flat to slight increases (0-5%) due to hurricane exposure.
Continued Rate Increases
Florida (all regions): 5-20%+ increases persisting despite market softening, driven by catastrophic hurricane losses and insurer exits.
California (wildfire-exposed areas): 10-30%+ increases as insurers reduce wildfire exposure.
Louisiana, Mississippi Gulf Coast: 8-18% increases due to hurricane risk.
Coastal properties (Atlantic and Pacific): 5-15% increases despite overall market softening.
What to Watch: Will Rates Continue Declining?
The soft market could continue for 2-3 years if conditions remain favorable, but several factors could reignite rate increases:
Factors Supporting Continued Softening
Insurer profitability: As long as combined ratios remain below 100%, insurers can maintain or reduce rates while remaining profitable.
Elevated capital: Continued capital inflows into insurance markets increase capacity and competition.
Loss experience: If 2025-2026 avoid major catastrophe years ($50B+ in insured losses), markets remain soft.
Reinsurance pricing: If reinsurance costs stabilize or decline, primary insurers can maintain lower pricing.
Factors That Could Reverse the Trend
Major catastrophe(s): A single catastrophic hurricane ($100B+ event) or series of severe events could deplete capital, tighten reinsurance, and reignite rate increases overnight.
Economic recession: Recessions often trigger increased fraud and claims frequency, pressuring insurers to raise rates.
Investment losses: Insurers invest premiums in bonds and stocks. If investment markets decline sharply, investment income falls, forcing insurers to increase underwriting profit (raising rates).
Regulatory changes: New building codes, climate disclosures, or reserve requirements could increase insurer costs, driving rate increases.
Most likely scenario: Soft market persists through 2025-2026 barring major catastrophes, followed by gradual hardening as catastrophe losses inevitably accumulate.
Key Takeaways
Commercial property insurance rates declined for the first time in seven years in Q2 2024, creating the best opportunity since 2017 for businesses to reduce costs and improve coverage terms.
Properties in low-catastrophe-risk areas benefit most, with rate reductions of 10-20% common in Midwest, Mid-Atlantic, and Mountain West markets.
High-risk coastal and wildfire-exposed properties still face increases, though the pace has moderated from 30-40% to 5-15% annually.
Seven strategies to capitalize: Shop aggressively, optimize deductibles, bundle coverage, invest in risk mitigation, challenge valuations, explore alternatives, and consider multi-year terms.
The soft market won't last forever: Historically, soft markets persist 2-4 years before catastrophe losses or other factors reignite rate increases. Act now to lock in favorable terms.
Work with experienced brokers: Navigating soft markets requires expertise to identify competitive carriers, negotiate effectively, and structure optimal coverage. Brokers with market knowledge deliver the best results.
The shift from hard to soft market is significant and offers tangible opportunities to reduce insurance costs—potentially saving tens or hundreds of thousands of dollars for businesses with substantial property portfolios. But capitalizing requires proactive effort: shopping coverage, negotiating aggressively, and optimizing risk management. Businesses that act decisively can benefit for years, while those that passively renew will miss historic savings opportunities.
Ready to capitalize on the soft property market? With rates finally declining after seven years of increases, businesses have a limited window to secure significant savings and improved coverage terms. Working with brokers who understand current market dynamics and have relationships with multiple carriers ensures you maximize this opportunity.
Sources: CRE Daily, Risk & Insurance, Marsh Global Insurance Market Index, Risk Strategies, Insurance Thought Leadership