Insurance is now an underwriting variable, not a closing-cost line item
The 2023-2024 premium shock has stabilized for most property types. Multifamily hasn't caught the relief, and the number that matters most has shifted from the premium to what's underneath it.
The shock is over. The adjustment isn't.
Multifamily, coastal retail, and industrial assets in climate-exposed markets absorbed double-digit premium increases, tighter exclusions, and higher retentions through 2025. That acute phase has largely passed: for well-managed, non-CAT properties, the market has moved from relief that things didn't get worse to something closer to genuine competition among carriers, with rates flat to trending slightly down in many cases.
But "the market has stabilized" is a headline about averages. Individual outcomes still vary widely by asset type, construction, and location — some owners are seeing real premium relief this year, others are not, and the gap between the two has as much to do with property characteristics as with the broader market cycle.
Why multifamily specifically hasn't caught the relief
Habitational risk is the segment where the stabilization story breaks down. Admitted carriers remain largely unwilling to write multifamily and hospitality risk, which keeps most placements dependent on the surplus lines market rather than standard admitted coverage. Underwriting scrutiny on these placements has stayed high even as headline pricing has eased elsewhere — meaning a sponsor's actual quote can still move meaningfully between the pro forma and the binder, months apart.
The real cost isn't the premium line
The more consequential shift for underwriting isn't the premium number itself — it's what's changed around it:
- Higher deductibles and retentions, which increase the owner's exposure to any single loss event rather than transferring it to the carrier.
- Narrower coverage terms and exclusions, which can leave gaps a sponsor doesn't discover until a claim.
- Stricter lender requirements tied to coverage adequacy, which can complicate or delay a closing if the insurance placement doesn't satisfy the loan's conditions.
Taken together, these create real operating cost volatility that a static insurance line item in a pro forma doesn't capture — and that volatility is exactly what a lender's underwriting will price into the loan.
What sponsors are doing about it
Some owners, particularly those with larger, geographically diversified portfolios, are turning to captive insurance structures to manage placement volatility directly rather than remain fully exposed to surplus-lines pricing swings year over year. That's a portfolio-level solution and not available to every sponsor, but it reflects how seriously insurance has moved from a closing condition to a structural consideration in how sponsors think about risk retention.
Where we help
We push the insurance conversation into the underwriting model at the start of a deal, not the end of it — getting sponsors and LPs a real quote or binder before a capital structure is finalized, and factoring surplus-lines dependency into the debt sizing conversation with lenders directly. A placeholder insurance number is one of the more common reasons a capital structure needs to be re-cut mid-process, and it's avoidable.