Commercial Property Insurance Is Softening in Most Markets – But Not Everywhere

Written by:

Alejandra Rodriguez

Date:

21 Aug 2026

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Small commercial property owners have spent the past few years hearing that insurance is getting harder to secure and more expensive across the board. For strip mall operators, warehouse landlords, and retail building investors, the assumption has been that coverage will only keep tightening. According to Andrew Kowalske, Chief Product Officer at Blitz Insurance, the commercial side of the market is moving in the opposite direction.

Kowalske says that over the past 12 to 18 months, the admitted insurance market, where standard carriers operate under state-regulated rate structures, has expanded its appetite considerably, and that risks previously pushed into the excess and surplus (E&S) lines during the prior hard-pricing cycle are flowing back to admitted carriers. In his view, this is intensifying competition among E&S insurers for the business that remains.

“Because we’re in the excess and surplus market, we often will see things based on the admitted market’s appetite,” Kowalske says. “As the admitted market expands the types of risks that they will write, it will reduce the amount of risks that go into the excess and surplus markets.”

What Pushes a Property Into E&S

For commercial property owners unfamiliar with the distinction, landing in the E&S market, where non-admitted carriers operate outside standard regulatory rate structures, typically happens for one of a few reasons: the property sits in a catastrophe-exposed area (hurricane, wildfire, or severe convective storm zones), it has a challenging occupancy type, or it carries a troubled loss history with prior claims.

The practical consequence for the owner is higher premiums or more restrictive coverage terms, Kowalske says.

Blitz’s underwriting, he notes, focuses on the small end of this market: commercial buildings with a maximum total insured value of $5 million per location, with typical submissions involving retail strips, restaurants, small warehouses, or distribution facilities, nothing exotic in isolation, but collectively a large segment of the commercial real estate landscape that standard carriers sometimes decline.

The Softening Cycle

Kowalske’s read on the market runs counter to headlines about an insurance crisis: on the commercial property side, he argues, terms are broadening in most areas.

He describes a soft market as one where insurers receive less premium for the coverage they offer, either charging lower premiums for the same coverage or broadening what they will cover at existing rates. “It’s been a fairly favorable couple of years when it comes to catastrophe property insurance for the industry overall,” he says. “Actually, terms are getting broader, not narrower in most areas.”

If Kowalske’s assessment holds, this could mean the window for securing broader coverage at competitive rates has opened for commercial real estate investors, a reversal from the tighter conditions of the prior cycle. Owners of small commercial buildings who were pushed into the E&S market during harder years may find, in his telling, that admitted carriers are now willing to write their risks again, with lower premiums or fewer coverage exclusions than they faced 18 months ago.

California Remains the Exception

Not every market is participating in this softening, according to Kowalske. He points to California’s property insurance environment as an outlier, driven by two reinforcing pressures: a higher-than-average regulatory burden on insurance companies regarding rates and filing rules, and persistent wildfire exposure.

“California is still a pretty hard market on the property side, mostly because of both regulatory and wildfire concerns,” Kowalske says. The difficulty is most acute on the homeowner side, where many residents struggle to secure coverage at all, though he notes it affects commercial real estate as well.

For investors considering commercial properties in California, this suggests insurance costs may remain elevated relative to other states, with coverage terms that could still carry more exclusions or higher deductibles, even as markets elsewhere loosen.

Severe Convective Storms Are the Emerging Cost Driver

Beyond the well-known perils, wind, flood, wildfire, Kowalske flags one category of risk that has been steadily worsening in ways that now show up in pricing. Severe convective storms, which include hail and tornado events concentrated in the Midwest and mountain regions, have driven increasing losses over time, he says.

“The severe convective storms have actually been getting increasingly worse,” Kowalske says. “That’s caused a lot of increase in rates within some of those states, which you can see in the loss trends and then the rates that insurers charge there.”

For investors evaluating properties in Illinois and surrounding states, this trend points to a cost pressure that may not appear in standard due diligence focused on purchase price and rental income. Annual premium increases tied to convective storm losses may be shaping the long-term operating expense profile of buildings in these regions, a line item that could compound over hold periods.

What This Means for Commercial Property Investors

By Kowalske’s account, the commercial property insurance market is not moving in one direction. In most of the country, he says conditions have improved for small commercial building owners over the past 12 to 18 months: premiums are more competitive, coverage terms are broader, and risks that previously required E&S placement may now qualify for admitted coverage. In California, he says the opposite holds; regulatory constraints and wildfire exposure keep the market tight. And in the Midwest and mountain states, he points to severe convective storm losses as a factor driving rate increases that offset some of the broader softening.

Investors who acquired small commercial properties during the hard market and locked in E&S coverage at higher rates may want to consider shopping their renewals now, while, according to Kowalske, admitted carriers are actively expanding their appetite. Those evaluating new acquisitions may also want to factor geographic insurance cost differences into their underwriting, as a building in a severe convective storm zone or in California could carry structurally higher insurance costs that persist regardless of the broader market cycle.

The soft market will not last indefinitely; a single bad catastrophe season can tighten underwriting across the industry within months. But for now, according to Kowalske, commercial property owners outside California’s hardest-hit zones are seeing conditions move in their favor.

About the Expert: Andrew Kowalske is Chief Product Officer at Blitz Insurance, a company underwriting commercial property risks with a maximum total insured value of $5 million per location.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.