By Isha Marathe

April 14 - (The Insurer) - Property insurance prices remain elevated for U.S. real estate and hospitality insureds in 2025 but the market has improved for most, while rate increases in casualty lines range from high-single digits to above 15%, Arthur J Gallagher said.

In a report on the real estate and hospitality sector, Gallagher said the property line has improved despite the California wildfires.

Catastrophe exposed, shared and layered placements are received the most rate relief, with ample capacity from the London markets fueling competition and returning decreases into the double digits, the report said.

Single carrier placements are improving to a lesser extent for real estate owners and operators. Carriers are cautious because they must ingest a whole loss while being more exposed to reinsurance volatility.

The builder's risk market is also improving, with increased capacity driving competition, and leading to lower pricing and deductibles.

Despite the softening property market, Gallagher said the toughest conditions remain for real estate insureds with older (pre-1985) habitational risks and loss histories. Smaller insurers are cutting their appetite for these risks and moving them into the excess and surplus lines market.

"Insureds able to remain in the admitted market are receiving mid to high single-digit rate increases, but at rates that are 50% to 100%-plus beneath what they would be able to secure in the E&S marketplace," the report said of older assets.

As a result, insureds entering the E&S market might experience sticker shock, but the higher rates are likely worth program longevity that can handle property rate volatility that may be in the pipeline, the report showed.

CASUALTY

In contrast to the property line, casualty markets in 2025 continue to get more difficult for real estate and hospitality insureds, with renewal results varying between insurers. Gallagher expects rate hikes into the double digits.

"Capacity is strained, especially for habitational risks," the report said.

In the umbrella and excess markets, insurers continue to reduce the limits they are willing to offer, dropping from $25 million a few years ago to as low as $5 million, Gallagher said.

At the same time, deductibles and self insured retentions are increasing, with some reaching up to $250,000. Larger insurers are exploring alternative structures like captives to control costs, while smaller insurers who are unable to leverage captives, are combining admitted and surplus lines insurers to build out liability coverage towers, Gallagher said.

The report showed restrictive underwriting for multifamily, retail, restaurants, bars and nightclubs especially, since losses can affect multiple people during a single occurrence in these areas.

Gallagher said that proper contractual risk transfer is essential to secure coverage with better rates and terms and conditions.

Additionally, insureds in this line who contract on-site security, have to ensure that vendors carry assault and battery coverage with no sub-limits or exclusions and property owners hiring third-party management firms have to ensure that their coverage has no exclusions for these perils.

Gallagher said that without meaningful tort reform, general liability and umbrella and excess pricing is going to continue facing pressure from nuclear verdicts and social inflation.