When property insurance becomes a financing obstacle

What changed

Reinsurance market hardening since 2017: catastrophic loss years (Harvey, Irma, Michael, Ida, Helene), wildfire activity, and convective storm losses have driven reinsurance pricing meaningfully higher.

Primary insurance market response: premium increases passed through to property owners; capacity reductions in highest-risk geographies (Florida, Louisiana, Texas Gulf Coast); higher deductibles required (named-storm deductibles often 5% to 10% of insured value); some markets shrunk to surplus-lines and excess-and-surplus carriers only.

Florida and Texas specifically: state regulator data (FL OIR market reports, TX Department of Insurance reports) shows premium increases averaging 50% to 100% on multifamily and commercial since 2017, with the steepest increases in coastal counties.

How insurance affects loan sizing

NOI impact: insurance is an operating expense. Insurance premium up = NOI down = sizing tighter. A property whose insurance premium doubled from $150K to $300K loses $150K of NOI; at 8.5% debt yield, that's $1.76M less loan supportable.

Lender stress test: most lenders now stress-test insurance at trailing actual + a forward increase (typically 10% to 25%) to size to projected forward expense, not trailing.

Debt-yield floor adjustments: some lenders have added 50 to 100 bps to debt-yield floors in highest-exposure markets to compensate for forward insurance volatility.

Coverage adequacy review: lender's insurance review checks for adequate property coverage, business interruption, named-storm coverage where applicable, and deductible structure. Inadequate coverage at closing is increasingly common as a deal-killer.

Where insurance is most acute (2026)

Florida: 50%+ premium increases since 2017 on most CRE; surplus-lines and excess-and-surplus carriers dominate; named-storm deductibles 5% to 10% standard; some submarkets effectively uninsurable for new commercial development.

Texas Gulf Coast (Harris, Galveston, Brazoria counties): 50% to 100% premium increases; insurance review is gating on most institutional CRE loans.

Louisiana: similar to Florida and Texas Gulf.

California (wildfire zones): coverage capacity reduced; FAIR Plan dependency; deductibles structures differ.

Texas inland (DFW, Austin metros): convective storm losses have driven premium increases of 25% to 50%, less acute than Gulf Coast but material.

How to handle it

Engage broker early. Insurance binders should be in process at term sheet, not at closing. Lenders increasingly require committed binders at signing.

Underwrite forward, not trailing. Use a 10% to 25% premium increase assumption in the operating budget to anticipate the next renewal.

Quote multiple insurance brokers. Insurance pricing varies meaningfully across brokers and across surplus-lines markets. The right broker for the property matters.

If the deal is on the edge, structure can sometimes solve. Higher deductibles in exchange for lower premium (with sponsor-funded deductible reserve), additional named-storm coverage outside primary policy, or risk-engineering improvements that reduce premium are all options.

Frequently asked questions