Future of insurance on coastal properties?

[Andrew Gavre]

I am in the process of buying a commercial building in Savannah, Ga and know there is a lot of discussion around “climate change premiums” in relation to insurance. 

What are you all seeing as the future of insurance in coastal cities? Blown out of proportion or a real concern?

[Jason Bott]

@Andrew Gavre there will continue to be upward pricing pressure for insurance in coastal areas for the next 2 years, just not to the 20%-30% rate increase we have been seeing.  If rates keep going up, and we then have 2-3 years of no hurricanes, the insurance carriers will be very profitable, and will start to chase business, lowering premiums.  If we continue to have storms with billion $ payouts, pricing will continue to climb.

Coastal insurance has always had a high price and it will always be volatile.  

[Jason Bott]

@Andrew Gavre there will continue to be upward pricing pressure for insurance in coastal areas for the next 2 years, just not to the 20%-30% rate increase we have been seeing.  If rates keep going up, and we then have 2-3 years of no hurricanes, the insurance carriers will be very profitable, and will start to chase business, lowering premiums.  If we continue to have storms with billion $ payouts, pricing will continue to climb.

Coastal insurance has always had a high price and it will always be volatile.  

[Bryan Montross]

I think insurance in coastal cities is a real concern. It was devastating the damage that just occurred due to hurricane Helene. One of the comments I heard is that in Florida, Citizens, the State sponsored insurance, could basically run out of funds due to the amount of damage. This doesn't mean you stop investing in those areas, it just means you need to factor that into underwriting and be prepared for it.

[Jonathan Greene]

You got great responses. Personally, I am avoiding those markets for now just for a sustainability and environmental outlook, but I would overestimate for insurance premiums, almost 2x what you think just so you have a buffer. It will also be good leverage for large-scale buyers against price with rising insurance because those same sellers may not be able to pay for new insurance premiums when they pop.