Future Cities

Insurance costs heavily increased in climate sensitive states

Map of the Month

October 31, 2023 2 Minute Read


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Climate change is beginning to affect commercial real estate investment performance. One glaring effect is rising insurance costs. The map shows the basis-point (bp) increase in insurance costs as a share of total operational expenditures (OPEX)1.

Insurance is comprising a larger share of OPEX nationwide, but the increase is especially acute in states with significant climate change exposure. These also tend to be states where insurance already commands a high proportion of OPEX. For example, Florida has seen a 440 bp increase in insurance costs since Q2 2018, while the jump has been 370 bps in California. Both states well exceed the national average of 240 bps.

The map also depicts the FEMA Risk Index, a gauge of natural-hazard risks. Generally, insurance costs have spiked more sharply in states with elevated FEMA risk levels. However, Texas, Arizona and Nevada, each at the highest level of risk, according to FEMA, have largely avoided outsized insurance increases – for now. You can expect insurance costs to rise further in these states, particularly in coastal markets like Houston, more so than in inland markets, such as Austin and Dallas.

1 Sample derived from the NCREIF database; states with fewer than 15 properties in the NCRIEF database are excluded.

Figure 1: State Level Comparison of FEMA State Risk Rating to Basis Point Change in the Share of OPEX Going to Insurance

Insurance costs heavily increased in climate sensitive states