Insurance Market Conditions Generally Favorable for Buyers in Real Estate and Hospitality Sectors

Insurance market conditions were generally favorable for buyers in the real estate and hospitality industries in 2015, a trend expected to continue through 2016, barring unforeseen conditions.

For example, in property insurance, including hospitality and gaming organizations, renewal rates were generally down 5% to 15% in the fourth quarter of 2015, driven by an oversupply of capital and market competition.

Market conditions were also competitive for most real estate risks in most casualty coverage lines in 2015. In the fourth quarter rates generally renewed:

• Flat to up 5% for commercial real estate.
• Flat to up 10% for habitational properties.
• Flat to down 5% for hospitality clients.

Despite generally favorable conditions for management liability insurance, including directors and officers (D&O) liability, insurers are concerned about merger-objection litigation and the emergence of activist investors in the real estate investment trust sector.

The environmental insurance market remained generally competitive for most real estate and hospitality industry buyers in 2015. A competitive and generally stable market for most insureds is expected in 2016, barring any unforeseen changes.

Among the trends worth watching in 2016:

• Cyber security: A recent data breach involving a large multifamily property operator has raised concerns about data and privacy exposures for real estate companies; interest in cyber insurance is especially strong in the hospitality and gaming sector.
• Data quality: Real estate companies should work with their insurance advisors to review and improve the quality of their property and casualty data to position themselves to achieve the best possible outcomes at renewal.

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