NEW YORK, NY – Commercial property insurance rates turned negative in Q3 2025 for the first time since 2019, marking a historic shift in a market that has delivered punishing double-digit increases for six consecutive years. Non-catastrophe-exposed properties with favorable risk profiles are now seeing rate decreases of -5% to -10%, while even catastrophe-prone properties are experiencing flat to modest decreases of -20% to flat, according to October 2025 data from multiple broker market reports.
This represents a fundamental market transformation. From 2019 through 2024, commercial property insurance was trapped in one of the most severe hard markets in modern history, with cumulative rate increases exceeding 150% for many accounts. Businesses paid premium increases of 20-40% annually just to maintain the same coverage, with catastrophe-exposed properties facing increases exceeding 100% in some renewals.
The 2025 shift to negative rates signals that insurers have successfully restored profitability after years of catastrophic losses, and competition is returning to the market. For commercial property buyers, this creates an unprecedented opportunity: renewals that were once battles to avoid massive increases are now negotiations that can yield actual premium decreases and improved coverage terms.
Understanding what's driving this shift, who benefits most, and how to capitalize on the opportunity is critical for every business with commercial property exposure.
The Six-Year Hard Market That Broke Commercial Property Insurance
To appreciate why negative rates in 2025 are so significant, you need to understand the severity of the 2019-2024 hard market.
What Triggered the Hard Market
Catastrophic loss accumulation overwhelmed the market:
2017-2018 catastrophe years: Hurricane Harvey ($125 billion), Hurricane Irma ($50 billion), Hurricane Maria ($90 billion), California wildfires ($85 billion combined), created $350 billion+ in insured losses over two years.
Result: Reinsurance costs spiked 30-50% at January 1, 2019 renewals, forcing primary insurers to dramatically increase commercial property rates to maintain profitability.
2019-2024 secondary perils explosion: Severe convective storms (tornadoes, hail, straight-line winds), wildfires, floods, and freeze events created consistent $50-80 billion annual insured loss years, with 2023 hitting $135 billion in global insured catastrophe losses.
Example: A commercial building in Dallas, Texas renewed at $45,000 premium in 2018. By 2024, after severe hailstorm losses in 2019, 2021, and 2023, the same building with identical coverage renewed at $112,000—a 149% cumulative increase over six years. The business had zero claims; they simply operated in a geography experiencing repeated catastrophe events.
Reinsurance capacity withdrawal: Major reinsurers (companies that insure insurance companies) reduced property catastrophe exposure by 20-30% from 2020-2023, forcing primary insurers to retain more risk and charge higher premiums to compensate.
Key dynamic: Reinsurers provide capacity that allows primary insurers to write larger policies and cover catastrophe risk. When reinsurance capacity shrinks, primary insurers must either:
- Charge much higher premiums to self-retain risk
- Reduce the amount of property coverage they'll write
- Exit catastrophe-exposed markets entirely
All three occurred simultaneously from 2020-2024.
The Impact on Commercial Property Buyers
Rate increases were relentless and often illogical:
2019: Average increases of 8-12% across all commercial property 2020: Average increases of 10-20% 2021: Average increases of 15-25% 2022: Average increases of 20-35% 2023: Average increases of 15-30% 2024: Average increases of 5-15%
Cumulative impact: A business paying $100,000 in commercial property premium in 2019 saw that grow to $250,000-$350,000 by 2024, assuming no claims and no coverage changes.
Catastrophe-exposed properties faced even worse: Properties in Florida, California, Texas, Louisiana, and other CAT zones experienced increases of 50-100%+ annually in 2022-2023.
Example: A warehouse in Fort Myers, Florida paid $180,000 in property premium in 2021. After Hurricane Ian in 2022, the 2023 renewal came back at $650,000—a 261% increase—with a $500,000 named storm deductible (up from $100,000) and wind coverage provided by a surplus lines carrier instead of the admitted carrier that had covered the building for 15 years.
Coverage restrictions tightened dramatically:
- Named storm deductibles increased from 2-5% to 5-10% of insured values
- Wind coverage often excluded entirely or moved to separate policies
- Flood coverage became nearly impossible to obtain outside NFIP
- Sublimits proliferated (reduced coverage for specific perils)
- Coinsurance requirements increased, penalizing underinsurance
Capacity became scarce: Many insurers stopped writing property coverage entirely in catastrophe zones. Florida, California, and Louisiana saw major carriers exit or dramatically reduce new business and renewals, forcing buyers into higher-cost surplus lines markets.
What Changed: Why Rates Are Turning Negative in 2025
Five converging factors have flipped the commercial property market from hard to soft:
1. Insurers Achieved Profitability and Built Reserves
Combined ratios improved to sustainable levels:
2022: Industry average combined ratio of 108-112 (insurers paid out $1.08-$1.12 in claims and expenses for every $1.00 in premiums) 2023: Improved to 102-105 as rate increases began offsetting loss costs 2024: Improved to 95-99 as rates fully caught up and catastrophe losses moderated 2025 projection: 92-96, indicating healthy underwriting profit
What this means: Insurers no longer need aggressive rate increases just to stop losing money. They're now profitable and building reserves, allowing them to compete for growth.
Capital positions strengthened: After years of reserve builds, insurers have stronger balance sheets and can absorb more risk without excessive rate increases.
2. Catastrophe Losses Moderated in 2024-2025
2024 was a relatively benign catastrophe year:
- Total global insured catastrophe losses: $115 billion (below the $135 billion 2023 total)
- U.S. catastrophe losses: $65 billion (well below the 10-year average of $85 billion)
- No single "mega-catastrophe" event exceeding $30 billion
2025 has continued the trend:
- Through Q3 2025, insured catastrophe losses are tracking toward $80-95 billion globally
- Major hurricanes have stayed offshore or weakened before landfall
- Wildfire season has been active but not catastrophic (Los Angeles fires were primarily personal lines losses)
Impact: When catastrophe losses stay within budget, insurers gain confidence to reduce rates and expand capacity.
3. Reinsurance Costs Declined Sharply
January 1, 2025 reinsurance renewals delivered relief:
- Property catastrophe reinsurance rates decreased 10-20% on average
- Capacity increased 15-25% as new capital entered the market
- Terms improved (lower attachment points, broader coverage)
Why this matters: Lower reinsurance costs flow directly to lower commercial property rates. When insurers pay less for reinsurance protection, they can charge policyholders less while maintaining the same profit margin.
Example: An insurer paying $40 million for catastrophe reinsurance in 2024 paid $32 million for the same coverage in 2025 (20% decrease). This $8 million savings allows them to reduce rates on the $400 million in commercial property premium they write while maintaining profitability.
4. Competition Returned to the Market
Insurers are fighting for market share:
- Carriers that exited catastrophe zones in 2022-2023 are cautiously re-entering
- Regional carriers are expanding into new states
- Surplus lines capacity increased dramatically (30-40% more capital deployed)
- New insurtech players are entering commercial property with data-driven pricing
Result: Buyers have more options, creating competitive pressure on rates.
Example: A manufacturing facility in Atlanta that had two quote options in 2023 now has seven carriers competing for the account in 2025. The incumbent carrier at $285,000 faced quotes of $240,000, $255,000, $260,000, $265,000, $270,000, and $275,000 from six competitors. The incumbent dropped to $235,000 to retain the account—a 17.5% decrease.
5. Property Values and Replacement Costs Stabilized
Inflation moderated:
- Construction cost inflation slowed from 12-15% (2022-2023) to 4-6% (2024-2025)
- Material costs stabilized as supply chains normalized
- Labor shortages eased in many markets
Result: Insurers face less pressure to increase rates to keep pace with rising replacement costs.
Who's Seeing Negative Rates and Who's Not
The market shift isn't uniform. Rate changes vary dramatically based on catastrophe exposure, loss history, and risk profile:
Non-Catastrophe Properties with Clean Loss History: -10% to -5%
Profile:
- Located outside hurricane, wildfire, earthquake, and severe convective storm zones
- No property claims in past 3-5 years
- Modern construction (built after 2000)
- Strong risk management (sprinklers, fire suppression, security systems)
- Accurate valuations
States seeing the most aggressive decreases:
- Ohio, Pennsylvania, Indiana, Michigan (minimal CAT exposure)
- Upper Midwest (Wisconsin, Minnesota, Iowa)
- Northeast (except coastal areas)
Example: A distribution center in Columbus, Ohio paid $340,000 in property premium in 2024. The 2025 renewal came back at $306,000 (10% decrease) with improved terms: lower deductibles ($25,000 vs. $50,000), broader coverage (removed several sublimits), and increased limits at no additional cost.
Catastrophe-Prone Properties with Clean Loss History: -20% to Flat
Profile:
- Located in hurricane, wildfire, or severe convective storm zones
- No claims in past 3-5 years
- Strong risk mitigation (storm shutters, fire-resistant construction, fortified roof)
- Well-maintained properties
Why the wider range: Insurers are cautiously re-entering CAT zones but remain selective. Properties demonstrating strong risk mitigation are rewarded with significant rate decreases. Properties without risk improvements see flat renewals.
Example: A hotel in Charleston, South Carolina (hurricane exposure) installed impact-resistant windows and reinforced the roof to meet FORTIFIED standards in 2024. Property premium was $520,000 in 2024. The 2025 renewal delivered a $416,000 premium (20% decrease) due to the risk mitigation improvements plus general market softening.
Contrast example: An identical hotel in Charleston without risk improvements renewed flat at $520,000. The owner missed the opportunity to capture market softening by not demonstrating reduced risk.
Properties with Unfavorable Loss History: -10% to +10%
Profile:
- Multiple property claims in past 3-5 years
- Located in any geography (CAT or non-CAT)
- Poor risk management or maintenance
Reality: Even in a softening market, claims history matters. Underwriters view loss patterns as predictive of future claims.
Example: A retail building in Phoenix, Arizona (non-CAT zone) had three property claims in four years: roof leak ($85,000), HVAC fire ($140,000), and water damage from burst pipe ($65,000). Total claims: $290,000 on a building insured for $4 million. Despite the softening market, the 2025 renewal increased 8% to $195,000 (up from $180,000) as underwriters priced in elevated future loss expectations.
Specific Industry Variations
Manufacturing and warehousing: Seeing the most aggressive rate decreases (-10% to -5%) due to low claims frequency and strong risk management practices.
Hospitality (hotels, restaurants): Moderate decreases (-5% to flat) but highly location-dependent. Coastal properties still facing challenges.
Retail: Mixed results (-5% to +5%) depending on theft exposure and property condition. High-theft urban locations facing increases despite overall market softening.
Multifamily residential: Limited decreases (flat to -5%) as insurers remain cautious on habitational properties after years of severe convective storm losses to apartment complexes.
Five Strategies to Maximize Savings in the Softening Market
The shift to negative rates creates specific opportunities for buyers:
Strategy 1: Shop Aggressively—Markets Are Competing
The hard market mentality was: "Be grateful if your incumbent renews you at +15%."
The soft market reality is: "Your incumbent should compete for your business or lose it."
How to shop effectively:
Get 6-8 competitive quotes: More carriers are willing to quote, and rate variations between markets are significant.
Request quotes 90-120 days before renewal: Underwriters have bandwidth to evaluate submissions, unlike the hard market when they were overwhelmed.
Provide complete loss history: Transparency builds trust. Provide 5-year loss runs showing all claims. Clean loss history is your most powerful negotiating tool.
Highlight risk improvements: Document any upgrades: roof replacements, fire suppression installations, security enhancements, storm mitigation. Underwriters reward risk reduction.
Example: A logistics company in Pennsylvania shopped their property renewal 90 days out with detailed loss history (zero claims in 8 years) and documentation of a new sprinkler system installed in 2024. They received eight quotes ranging from $280,000 to $380,000 (incumbent was $375,000). They selected a $285,000 quote—a 24% decrease—with better coverage terms.
Strategy 2: Improve Coverage While Rates Are Decreasing
The hard market forced coverage compromises: Higher deductibles, sublimits, restricted perils, coinsurance requirements.
The soft market allows coverage improvements: Lower deductibles, broader coverage, higher limits, removal of restrictive terms.
Coverage improvements to negotiate:
Reduce deductibles: If you increased deductibles from $25,000 to $100,000 during the hard market, negotiate back down. Premium savings from lower rates can fund lower deductibles.
Remove sublimits: Many policies added sublimits during the hard market (limited coverage for specific perils like wind, flood, mold). Negotiate removal or increase sublimits.
Eliminate coinsurance clauses: Coinsurance penalizes underinsurance. Push to remove these clauses or negotiate agreed value coverage instead.
Add back excluded perils: If wind, flood, or other perils were excluded, negotiate reinstatement (may require separate policies but at improved rates).
Example: A manufacturing plant had increased their all-risk deductible from $50,000 to $150,000 in 2022 to manage a 35% rate increase. In 2025, with rates declining 12%, they negotiated the deductible back down to $50,000 while still achieving a 9% overall premium decrease ($450,000 to $410,000).
Strategy 3: Accurate Valuations Prevent Coverage Gaps
Replacement cost inflation from 2020-2024 means many properties are underinsured. Building replacement costs increased 30-50% over that period, but many insureds didn't increase their insured values proportionally.
The risk: Underinsurance triggers coinsurance penalties, leaving you responsible for a portion of every claim even when damages are below policy limits.
How coinsurance works: If your policy has an 80% coinsurance clause and you only insure the building to 60% of replacement cost, you'll only collect 75% (60/80 = 0.75) of any claim, even if the claim is far below your policy limit.
Example: Building replacement cost: $10 million. You insured it for $6 million (only 60% of replacement cost). Policy has 80% coinsurance clause. A $500,000 fire occurs. Insurance pays: $500,000 × (6/8) = $375,000. You pay $125,000 out of pocket despite having a $6 million policy.
Action step: Obtain updated replacement cost valuations from a professional appraiser. Ensure insured values reflect current replacement costs. The softening market makes it easier to increase coverage limits without premium pain.
Strategy 4: Demonstrate Risk Mitigation to Unlock Deeper Discounts
Underwriters reward risk reduction, especially in the current market where they're competing for well-managed accounts.
High-impact risk mitigation measures:
Fire protection upgrades:
- Install or upgrade sprinkler systems (can reduce rates 15-30%)
- Install fire alarms with central station monitoring (5-10% discount)
- Improve fire-resistive construction (10-20% discount)
- Reduce combustible materials storage
Storm mitigation (CAT zones):
- Install impact-resistant windows and doors (10-20% discount in hurricane zones)
- Upgrade to fortified roof meeting IBHS standards (15-30% discount)
- Install storm shutters (5-15% discount)
- Improve drainage to prevent flood damage
Security and theft prevention:
- Install comprehensive surveillance systems (5-10% discount)
- Improve perimeter security (fencing, lighting, access controls)
- Install burglar alarms with central station monitoring
Example: A warehouse in Oklahoma City (tornado alley) invested $180,000 in a safe room for employees and reinforced the roof structure to meet enhanced wind resistance standards. Property premium was $295,000 in 2024. With documentation of the improvements, the 2025 renewal came back at $215,000 (27% decrease)—the insurer provided a 15% mitigation discount on top of the 12% market softening.
The owner calculated the $180,000 investment would pay for itself in 2.25 years through premium savings alone, while also protecting employees and reducing business interruption risk.
Strategy 5: Consider Higher Deductibles to Maximize Rate Decreases
Deductible strategy in a softening market differs from a hard market:
Hard market: Higher deductibles provided minimal premium relief as insurers focused on base rate increases.
Soft market: Higher deductibles generate meaningful premium savings as insurers compete on price.
Typical savings:
- Increase deductible from $25,000 to $50,000: Save 8-12%
- Increase deductible from $50,000 to $100,000: Save 12-18%
- Increase deductible from $100,000 to $250,000: Save 18-25%
When to increase deductibles:
- You have strong cash flow and reserves to fund higher deductibles
- Your loss history is clean (low frequency of small claims)
- You want to maximize premium savings and invest the difference in risk mitigation
When NOT to increase deductibles:
- You don't have sufficient reserves to fund the higher deductible
- You have frequent small claims that would now come out of pocket
- Your lender or landlord requires lower deductibles
Example: A hotel chain with 12 properties paid $1.8 million in property premium with $50,000 deductibles. They increased to $150,000 deductibles across all properties and received a $1.35 million premium (25% decrease). They self-insured the additional $100,000 deductible exposure by setting aside the $450,000 annual savings in a dedicated reserve account. Over five years with no major losses, they accumulated $2.25 million in savings.
What to Watch: How Long Will Negative Rates Last?
Soft markets historically persist 3-5 years before another hard market begins. Key factors that will determine how long this soft market lasts:
Factors supporting continued rate decreases:
- Strong capital positions: Insurers have robust balance sheets and can compete aggressively
- Benign catastrophe losses: If 2025-2026 continue with below-average CAT losses, rates will keep decreasing
- Increased competition: New capacity entering the market keeps pressure on rates
- Improved risk modeling: Better data and analytics allow insurers to price more accurately and compete more aggressively
Factors that could trigger renewed increases:
- Major catastrophe event: A single $50-100 billion hurricane or wildfire season could halt the soft market instantly
- Accumulation of smaller CAT losses: Even without a mega-cat, consistent $80-100 billion annual CAT loss years will pressure rates upward
- Economic recession: Higher claim fraud, increased property crime, and deferred maintenance could increase loss frequency
- Reinsurance cost increases: If reinsurance becomes more expensive at January renewals, insurers will pass costs to buyers
Most likely scenario for 2026-2027:
- Continued rate decreases in 2026: -5% to -10% for favorable accounts
- Stabilization in 2027: Flat to modest decreases as market reaches equilibrium
- Potential return to increases in 2028-2029 depending on catastrophe activity
Take Action Now—The Window Won't Stay Open Forever
Commercial property soft markets are cyclical and temporary. The current opportunity to lock in negative rates and improved coverage terms won't last indefinitely.
Three critical actions for every commercial property buyer:
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Shop your renewal aggressively: Start 90-120 days before renewal. Obtain 6-8 competitive quotes. Leverage competition to negotiate both price and coverage improvements.
-
Invest in risk mitigation: Use premium savings to fund property improvements that reduce loss exposure. Insurers reward risk reduction with additional discounts.
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Optimize coverage structure: Review deductibles, limits, sublimits, and terms. Eliminate compromises made during the hard market. Ensure valuations are accurate.
The time to act is now. Soft markets compress as insurers reach capacity and profitability goals. Early movers in 2025-2026 will capture the best terms. Those who wait until 2027-2028 may find the market has already shifted back to increases.
After six years of punishing increases, commercial property insurance is finally working in buyers' favor. Make sure you're getting the full benefit.
Ready to capitalize on the softening commercial property market? Negative rates and improved terms are available—but only for buyers who actively shop the market and demonstrate strong risk management. Working with experienced brokers who understand market dynamics and can access multiple carriers ensures you capture maximum savings while improving coverage.
Sources: Council of Insurance Agents & Brokers, Marsh McLennan, Aon, USI Insurance Services, Brown & Brown, Burns & Wilcox, Alera Group, Symphony Risk Solutions