Why Multifamily Insurance Costs Rose 55% Between 2021 and 2024

A 55% cost increase in three years is not a market cycle. It is a structural shift. Understanding why it happened, and why a significant portion of the increase is permanent rather than cyclical, is essential for operators who are still hoping the market will return to 2020 levels.

It will not. Here is why.

The five compounding drivers

Driver 1: The reinsurance crisis of 2021–2023

Reinsurance (the insurance that insurance companies buy to protect themselves from catastrophic losses) underwent a major market dislocation beginning in 2021. After years of below-average catastrophe losses lulled reinsurers into underpricing their products, the combined impact of COVID business interruption claims, 2020–2021 hurricane seasons, the Texas freeze of February 2021, and wildfire losses created simultaneous claims across multiple lines and geographies.

Reinsurers responded by dramatically reducing capacity, tightening terms, and raising rates at the January 2022 and January 2023 renewal cycles, the two worst reinsurance renewal cycles in decades. Primary carriers absorbed those increases and passed them directly to policyholders in the form of 2022 and 2023 premium increases. The 25% year-over-year multifamily insurance cost increase in 2023 was the direct downstream consequence of the reinsurance crisis.

Driver 2: Construction cost inflation

Insurance-to-value adequacy became a crisis issue during this period. Properties that were insured at 2019 replacement cost values were dramatically underinsured by 2022 and 2023, when construction costs had risen 30–40% and replacement cost values reflected those increases.

Carriers began requiring updated appraisals and raising insured values to reflect current construction costs. When the insured value of a property increases (even if the building itself has not changed) the premium increases proportionally. Operators who had not updated their insured values in several years faced both coverage gaps and premium catches at the same renewal.

Driver 3: Nuclear verdicts and social inflation

The liability side of the insurance market was simultaneously hit by what the industry calls social inflation, the trend toward larger jury awards, higher settlement demands, and increased litigation activity. Nuclear verdicts (jury awards above $10 million in cases that historically would have settled for far less) became more frequent across all commercial liability lines, including multifamily general liability.

Carriers responded by increasing liability reserves, tightening underwriting, and raising premiums on GL, umbrella, and excess liability lines. Unlike the property market, which showed some stabilization in 2024, liability lines continued to rise because the nuclear verdict trend has not abated.

Driver 4: Carrier exits from high-risk markets

The combination of catastrophe losses and reinsurance costs led multiple carriers to exit or dramatically restrict their presence in high-risk markets. Florida saw 15+ insurance carriers become insolvent since 2020. California's major insurers began withdrawing from new business well before the 2025 fires accelerated the trend.

When carriers exit a market, the remaining carriers face less competition and have more pricing power. Operators in affected markets who had multiple carrier options in 2019 found themselves with one or two options by 2022, and those remaining carriers knew it. The competitive pressure that historically kept premiums in check evaporated.

Driver 5: The crime score methodology in affordable housing

Insurance carriers have increasingly used crime score methodologies (algorithms that assess the crime risk of a property's location using public crime data) as underwriting criteria. Properties in locations with high crime scores face premium surcharges, coverage restrictions, or outright declinations.

The practical effect: affordable housing communities, which are disproportionately located in urban areas with higher crime scores, face the most severe insurance availability and cost challenges. Many affordable housing operators have reported that standard market carriers will not write their properties at any price, forcing them into surplus lines coverage at significant premium or into the uninsured risk of going without adequate coverage.

Why the baseline will not return to 2020 levels

Each of the five drivers above has left a permanent residue in the market:

• Reinsurance capacity has partially recovered, but pricing has not returned to pre-2021 levels and reinsurers have stated publicly that their historical underpricing was a mistake they will not repeat

• Construction cost inflation has not reversed: replacement cost values remain elevated and carriers will not accept insured values below current replacement cost

• Nuclear verdict frequency continues: there is no legal or regulatory mechanism that has materially reduced large jury awards, and litigation funding is growing

• Carriers who exited Florida and California have not returned in force: the markets remain constrained

• Crime score methodologies are entrenched in carrier underwriting systems and show no signs of being abandoned

The 2024 stabilization was real (property rates stopped rising for the first time since 2017) but stabilization at an elevated level is very different from a return to prior levels. Operators should budget for liability line increases of 10–20% annually for the foreseeable future.

The structural response

If the cost environment is structural rather than cyclical, the response needs to be structural as well. Waiting for the market to soften is a budget and NOI strategy built on an assumption that the data does not support.

Captive participation, risk mitigation investment, and optimized traditional placement are the three tools that address a structurally elevated cost environment. They do not make the costs go away, but they change who keeps the margin on the costs that remain.

The market has permanently repriced. The question is whether your insurance program has structurally adapted to the new environment.