2024 Multifamily Insurance Market: what to expect

Welcome back to Premium to Principal! In the November edition, we provided a behind-the-scenes look at the state of the property insurance market which was a huge hit - thank you all for taking the time to read and engage! The original plan for the December Edition was to cover all of the actionable steps and strategies you can use to leverage insurance to your benefit and get the most competitive premiums - BUT - after all of the recent developments we have seen as it relates to the 2024 Insurance Market, we switched gears to cover all things 2024 and our projections for what you are going to see in the marketplace in the very near future. Don't worry - the January edition will pick right back up with the tools you need to get the best premiums for your properties - as promised!

WARNING - To give you the tools necessary to understand the multifamily insurance marketplace, the changes to come in 2024, and make informed decisions for your specific situation - we are going out on a limb in many ways. What I mean is that we are utilizing the projections and data in the marketplace, key insights from leaders in the industry, and other key data/metrics to make these projections - but they are fully projections at their core, painting with a broad brush, and are naturally subject to change as things develop. We are all patient with the weatherman when he says it's not going to rain, and it does - right?!

What is Multifamily Insurance doing in 2024?

Right now - this is the Million Dollar question! After two/three excruciating years for Multifamily property owners, I am thrilled to report that at least for most, there is light at the end of the tunnel. In the last edition, we talked about what a hard market is, and the specific factors we are seeing that made it so tumultuous. The great news is that for many of those issues, the effects have already been experienced (major hikes in replacement cost valuations etc.) and they are unlikely to plague that market again in the near future. We project that the 2024 Insurance Market increases/decreases will almost exclusively be driven by Reinsurance Capital Capacity & Cost, and Carrier Profitability - leaving behind many of the other compounding issues that once affected the marketplace.

The graph above represents the inverse relationship between Reinsurance and Rate Increases - as reinsurance capital re-enters the marketplace and becomes more readily available and less expensive, the overall rates respond to the market trends in a positive way. As we continue to see these anticipated trends unfold in 2024, another thing to note is that the markets are projecting we see this relief continue through 2025. For a deeper dive on Reinsurance, please visit the previous Newsletter: Premium to Principal: State of the Property Insurance Market

How will these projections affect Multifamily Assets in each state/region?

As projected in the graph above, we are anticipating increased market stabilization and maneuverability across the board in comparison to recent years, with only a few caveats to note. Each market is going to have it's own respective nuances, and the asset specific factors will continue to play a large role in the overall insurance picture for any given asset, but in a general sense, this stabilization that we anticipate being able to see in 2024 will hopefully pave the way back to some sense of normal in coming years for these affected assets. The data does not support plummeting decreases and a resurrection of insurance costs from 5/10 years ago (wouldn't that be great?), but even a reprieve from the indigestible increases of late is a step in the right direction at the very least.

Another notable development is that the historic volatility and many of the issues of late have been on the property line of coverage, with casualty lines (General Liability and Umbrella/Excess Liability) remaining relatively stable, however this is expected to change in the upcoming year as casualty lines claims increase in both frequency and severity.

Green

Standard renewals are projected - this means some level renewals, with some decreases and digestible increases when/where necessary - carrier interest and capacity should be high

Yellow

Improved stabilization is projected to be present in these areas in increasing amounts, decreases unlikely however increases are projected to be within an acceptable and digestible range, with increasing carrier interest and capacity returning to the marketplace

Red

Continued volatility with severe increases projected, shrinking carrier capacity and carrier/reinsurance pullback, limited market maneuverability

Cat Exposed vs. Inland Located Assets

One important distinction that we want to make is that the disparity present in some Cat Exposed Areas (Coastal/Catastrophic Event Areas: LA, TX, FL, etc.) is not going away to disappear overnight, but those premiums moving forward in comparison to premiums in these areas/for these assets historically should show continued easing, with some assets being well positioned to improve upon their respective historic insurance picture of late. Inland Located Assets will continue to see more profound rate easing in comparison to their Coastal/Cat Exposed counterparts.

Closing thoughts - what does this mean for you?

• Multifamily Insurance Rates in most areas are projected to ease, with even the increase prone areas being in a materially different position than they have been historically
• The core drivers of the Multifamily Insurance Market and the subsequent rate increases are materially changing for the better, allowing all parties involved to better understand what is to come
• For most, 2024 is projected to bring material improvement and stabilization to their overall insurance picture, while for others, it should serve as at least a turning point to "stop the bleeding"
• Working with an insurance firm that truly knows Multifamily Insurance and how to navigate these waters is more important than ever to your continued success, and in some cases, even the viability of these deals/assets, to continue to seek and execute on creative solutions and leverage market relationships for your benefit.

Thanks again for bearing with me through the long read, more incredible things to come! In the meantime, here's how I can help you:

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