Real estate and hospitality companies continue to face significant and rapid change. Attitudes regarding in-office attendance are evolving, with companies in individual geographies and industries taking varying approaches. Migration patterns are shifting. Inflation remains somewhat elevated, tariff policy is unpredictable, construction costs are rising, and interest rates remain high. Weather patterns are changing, and catastrophe models are evolving. And third-party liability, with tort laws varying by state, remains a persistent threat.

All of this is contributing to an insurance landscape that has shifted significantly over the past five years and continues to challenge insurance buyers to make smarter decisions about their insurance programs.

Revisiting early 2025 trends

In the second half of 2025, several types of real estate assets are seeing growth and investor interest. These include data centers, multifamily and industrial developments, residential centers for seniors and students, hotels and warehouses. Each asset type has specific risks and exposures of which owners, developers, and managers should be aware.

In Lockton’s first-quarter 2025 market update on the sector (opens a new window), we noted several themes: underwriting selectivity, rising liability rates and retentions, litigation pressures, and catastrophe-related property risks. These trends continue.

Underwriters remain selective about habitational and hospitality in high-crime, urban zones. Though property rates and retentions have stabilized and, in some cases, fallen for well-performing portfolios, real estate buyers with adverse loss histories or valuation issues continue to experience pricing pressures from insurers looking for them to retain more risk. Litigation and social inflation, meanwhile, continue to drive liability costs and temper insurers’ risk appetites.

Other factors influencing the insurance marketplace include:

• Interest rates. Despite the Fed’s recent cut, interest rates remain high, raising asset valuations and complicating insurance-to-value ratios.

• Economic inflation. The inflated value of materials and labor are increasing claims expenses.

• Labor market trends. Talent shortages and turnover are boosting liability and safety risks.

• Climate change. In addition to hurricanes and tropical storms, so-called “secondary” perils such as wildfire, flood, and convective storm are becoming more common amid climate change. These perils are driving carrier losses in ways they have not modeled or priced for in the past.

Key market trends to watch

Property

We have seen the dramatic reemergence of a competitive landscape for property risks. For occupancies that were previously the hardest hit, property pricing continues to plummet as 2026 approaches. Softening continues for stable single-insurer placements as well.

Property insurance for real estate and hospitality risks is currently plentiful, with ample capacity available. Well-protected assets that are not catastrophe-exposed can generally expect flat to single-digit rate decreases at renewal, while many insurance buyers are seeing larger reductions, often in the double digits.

Insurers remain eager to deploy capital for quality risks with clear, reliable data, but show significantly less enthusiasm for insureds that provide incomplete or inconsistent information. What is notable is how quickly the market has shifted: Despite a record $40 billion in insured losses from January’s Eaton and Palisades fires (opens a new window), according to Swiss Re, carriers are aggressively pursuing business and competing for well-managed risks.

Conditions will be favorable for many property insurance buyers for the foreseeable future. Although this could change in the fourth quarter or in 2026, depending on loss events, a relatively quiet 2025 will keep insurers aggressive through the end of this year and into the 2026 Atlantic hurricane season. All insureds will welcome a softening market, but the greatest benefits will be realized by insureds with good loss experience and demonstrably superior loss control practices in place.

Soft market conditions will not be felt by all insureds equally because not all news on the property side has been good. So-called “secondary” perils have taken the spotlight as insurers absorb losses from an increasing number of high-dollar incidents. In 2024, 27 billion-dollar disasters caused nearly $183 billion in economic damage (opens a new window), making it the fourth-costliest year on record, according to the National Oceanic and Atmospheric Administration. Just five of the billion-dollar events occurring in 2024 were hurricanes and tropical storms. (See Figure 1.)

Flood risk, for example, is pervasive and costly, generating billions of dollars in losses in nearly all regions. In July 2025, flooding in central Texas claimed more than 135 lives and caused an estimated $18 to $22 billion in economic losses (opens a new window), according to AccuWeather. The Texas flood highlighted exposures to extreme weather in unexpected locations and the unfortunate consequences of underinsurance for such events. And as of this writing, the National Flood Insurance Program is not issuing new policies amid the federal government shutdown.

Severe thunderstorms, meanwhile, are growing in frequency and intensity. Swiss Re expects increasing losses as rising urbanization, asset values, and inflation magnify the impact of severe convective storms (SCS). SCS events set records in 2023 and 2024, and accounted for at least $31 billion of insured losses in the first half of 2025.

Finally, insurers are concerned about growing wildfire risks, which are difficult to place and underwrite. These concerns have only grown in the wake of the costly California wildfires. For real estate insurance buyers, it can be difficult to procure property coverage for certain areas of California and other remote areas along the West Coast or in Colorado.

To maximize the benefits of the soft market, all insureds should look to provide their insurers with robust, high-quality data, employ proactive loss control measures, and work closely with their brokers to structure programs that align with their individual risk appetites.

We have seen positive examples of buyers achieving meaningful rate relief and broader coverage options by investing in secondary data validation, improved construction, occupancy, protection, and exposure (COPE) information, or implemented targeted loss-prevention measures. In some cases, insurers have offered enhanced terms and expanded limits to insureds that clearly demonstrated superior risk management.

That said, the market’s current appetite is not without limits. Buyers with incomplete or inconsistent data, elevated catastrophe exposures, or poor loss histories may still face underwriting scrutiny, limited competition, or less favorable terms. The soft market presents opportunities, but capital will continue to flow primarily toward risks that can clearly evidence quality, transparency, and resilience.

Casualty

While the property market improves, liability challenges are intensifying. Rising litigation trends, loss valuation volatility, and exclusions are creating new complexities that demand proactive strategies.

Primary and excess casualty lines continue to be challenging for real estate owners, developers, and managers. In addition to capacity constraints — particularly for hospitality, habitational, and entertainment risks — insurers are implementing exclusions that further limit coverage. Exclusions that have become common in the real estate and hospitality sector include:

• Abuse/molestation.

• Assault and battery.

• Firearms.

• Habitability.

• Liquor liability.

• Cyber carveouts.

Other emerging exclusions apply to per- and polyfluoroalkyl substances (PFAS, also known as “forever chemicals”), mold, and Legionella bacteria that can cause respiratory illnesses.

Casualty underwriters are also putting a sharper focus on labor and safety risks, such as employee safety protocols and guest security. Premises liability remains a major risk across the real estate sector and a significant loss driver.

Litigation pressure from so-called nuclear verdicts — those valued at $10 million or more — and third-party litigation funding (TPLF) also continue to drive volatility in casualty insurance pricing. TPLF — which is unregulated at the federal level and only a handful of states have addressed — is attracting billions of dollars in venture and private equity capital and is contributing to larger settlements and judgments.

The growth in litigation expenses has influenced insurers’ appetites. Previously, $25 million layers from a single insurer for excess casualty programs were standard, but that is no longer the case. Casualty insurers have reduced their capacity offerings to $15 million or $10 million, with lower amounts available further down the tower. Many real estate insurance buyers are opting to buy less excess coverage to preempt large lawsuits and save money.

Unexpected coverage gaps, affordability of coverage, and the need to demonstrate adequate coverage to lenders are top of mind for many real estate industry insureds. These concerns are pressuring balance sheets and hampering deal structures and timelines. Importantly, Freddie Mac and Fannie Mae will not accept many of the exclusions listed above for loans they securitize. If such exclusions are in place, having a waiver strategy is critical or personal guarantees or escrows will be required.

There is, however, hopefully some light at the end of the tunnel. Tort reform enacted in Florida in 2023 represents one of the most sweeping overhauls of the state's civil litigation system in decades, while Georgia enacted its own significant reforms earlier this year. Both states are aiming to shift how civil lawsuits — especially those involving premises liability, personal injury, and insurance claims — are handled. The goal of both is to curb excessive litigation, reduce insurance costs, and limit liability exposure for businesses and insurers.

Texas, South Carolina, Louisiana, Alabama, Iowa and Missouri are all hoping to pass similar reforms with the same effect. While we continue to support these efforts, the results will unfortunately take several years to materialize.

Insureds seeking to secure liability limits at acceptable prices must be able to demonstrate a meaningful focus on loss control and claims, proactive risk management embedded within third-party contracts, and proactive litigation strategies. Liability underwriters are looking for well-drafted contracts, robust property maintenance programs, and onsite cameras/security monitoring. Choosing a broker who can assist in these efforts remains critical.

Specialty coverages

As insurers increase their scrutiny of certain risks, real estate and hospitality businesses are finding that stand-alone, specialty coverages can provide valuable protection. These include:

• Sexual abuse and molestation (SAM) and assault and battery (A&B) policies. These are becoming essential where GL insurers are excluding or sublimiting these coverages. In some cases, lenders have required real estate businesses to escrow funds for SAM and A&B exposures. Accepting sublimits and higher retentions may enable policyholders to avoid outright exclusions.

• Environmental insurance. Pollution liability risks are under increased scrutiny, particularly for redevelopment and aging portfolios.

• Active assailant. A specialized policy designed to protect organizations from the financial, legal, and operational consequences of attacks involving weapons or vehicles. These incidents may include mass shootings, stabbings, vehicular assaults, or other malicious acts.

Professional and executive risk

The real estate industry is focused on professional services, with elements of finance, investment, and property development and management. As a result, real estate companies often have overlapping exposures that can be complicated to insure or are often overlooked.

Recent litigation involving the use of AI-driven pricing tools and alleged price-fixing has further constrained carrier appetite for offering antitrust and regulatory coverage. Additionally, real estate executives are increasingly exposed to greenwashing claims, with some markets now seeking to exclude coverage for these exposures.

Private management liability

For private organizations, the marketplace for management liability remains generally competitive, with most excess placements currently oversubscribed. However, profitability is deteriorating for certain carriers, prompting a push for premium increases and rate adjustments tied to exposure growth.

Private real estate firms continue to face more restrictive terms due to their perceived higher risk profiles. Complex organizational charts and ownership structures often create underwriting hesitancy, resulting in a limited pool of carriers and underwriters with the expertise to properly assess and insure these entities. Partnering with an insurer that can offer an omnibus insured clause or draft custom policy wording for special purpose entities and special purpose vehicles is critical to avoid coverage gaps.

One solution to the complex risk profiles of real estate businesses is insurance policies that blend different management and professional liability coverages, such as directors and officers liability (D&O), professional liability/errors and omissions (E&O), employment practices liability (EPL), cyber, and crime insurance.

General partnership liability

The market for general partnership liability — which combines D&O and E&O insurance for investment companies into a single policy form — remains favorable to financially stable real estate companies with good loss histories. Most underwriters are seeking to keep rates flat, with some insureds able to secure rate reductions. Insurers are not imposing major coverage restrictions; policyholders are instead able to tailor coverage solutions to meet their needs.

Real estate investment companies require specialized policies to address the exposure for the selection and oversight of real estate service providers such as developers, construction managers, and property managers. When insureds provide these real estate professional services to their owned properties, additional policy customization is needed to address investor matters that may come into play.

• Despite the current administration’s more favorable stance, regulatory risk remains uncertain heading into 2026. Underwriters have identified several other key concerns, including:

• The outlook for commercial real estate amid macroeconomic uncertainty and geopolitical volatility.

• Litigation threats as nuclear verdicts grow in frequency.

• Rapid technology changes and disruptions, including AI washing.

• Workforce challenges and employee and executive safety.

• Climate-related risks.

• The overall health of real estate portfolios.

Professional liability/E&O

While rates in the standard professional liability market appear to be stable to decreasing, the insurance market for real estate professional liability faces persistent challenges due to growing exposures and continually evolving risks.

An abundance of carrier capacity, including from new entrants, has led to a competitive market. Companies with favorable risk factors may be able to capitalize on this to experience improvement in pricing.

However, recent claim developments have highlighted the need to focus on:

• Policy language, such as obtaining coverage for alleged antitrust violations like price-fixing and restraint of trade. Individual carriers’ policy forms and coverage offerings vary significantly.

• Limit adequacy, given the uptick in the frequency of class-action lawsuits and continually increasing attorneys’ fees.

It’s thus important for real estate companies to work with specialist brokers to tailor coverage to address their specific risks.

EPL

The EPL market is modestly stabilizing for real estate buyers, with most firms with good claims histories seeing modest premium increases. Insurers are eager to retain renewals and write new business, sometimes offering flat or even reduced rates to maintain accounts. However, conditions in California, New York, New Jersey, and Florida remain challenging.

Real estate employers may face a higher-than-average risk due to several factors. These include high employee turnover in property management and leasing roles, the use of surveillance and biometric systems in buildings, and decentralized workforces across multiple jurisdictions.

Companies also face greater third-party liability exposure from tenant discrimination or harassment matters. Separate tenant discrimination policies are designed to address this exposure, often offering lower retentions than standard EPL policies.

Other risks real estate companies must be mindful of include:

• Bias in the use of artificial intelligence in recruitment.

• Changing workplace harassment guidelines from the Equal Employment Opportunity Commission.

• Class-action suits or claims involving highly compensated employees.

• New laws requiring disclosure of compensation data, which could expose firms to wage discrimination claims if disparities exist.

• Coverage exclusions for and greater scrutiny of biometric data usage, which is increasingly relevant in property access systems.

Cyber

Cyber insurance conditions remain competitive, with many buyers renewing with modest rate decreases. Most insureds continue to renew with incumbent carriers, motivated by factors such as coverage continuity and competitive pricing.

Cybercrime insuring agreements within policies or endorsements to policies should not be limited to social engineering loss as invoice manipulation claims are on the rise. This is due to the large number of parties that are often involved in real estate transactions and discretionary authority for money transfers often falling to investment managers and general partners.

Traditional cyber insurance often falls short for real estate insurance buyers as standard policies exclude entities that are not wholly owned subsidiaries. Manuscripting policy language to specifically include such entities is essential; in some cases, additional insured endorsements may suffice, but the dynamic nature of ownership structures calls for a more detailed approach.

Crime

Crime insurance remains a profitable market for insurers, who continue to compete for next and existing business and deploy ample capacity. With new entrants applying pressure on traditional carriers, rates for most buyers are stable to slightly down.

Social engineering fraud remains a top concern for crime insureds, although losses have stabilized. Carriers continue to assess payment control measures and manage limits, though market capacity remains sufficient.

Additionally, many carriers include authentication provisions in policies that can significantly limit coverage. Lockton is working with underwriting leaders in this space to draft industry-leading language to help blend theft risk into a single product that provides more robust protection for social engineering and other property exposures than currently exists in the marketplace.

Pitfalls and risks

Real estate businesses should pay close attention to several pitfalls that can increase their risks. These include:

• Lack of transparency. Many property owners and investors prefer to keep financial details regarding their asset holdings private. Some avoid sharing important data that can help risk advisers structure better coverage.

• Artificial intelligence. AI tools are useful but can also raise risks. Disclosing how the business utilizes AI is important to avoid uncovered losses.

• Greenwashing. Real estate developers and asset managers are increasingly touting the advantages of sustainability features in properties. Overstating or inadequately documenting these features can invite claims of greenwashing, which may result in regulatory and/or legal action.

• Claim notification. Real estate insurance policies typically have broad claim triggers and place a duty on policyholders to report claims promptly. Businesses that receive litigation notices, demands, or potential claims should notify their risk and insurance advisers as soon as possible. Early reporting helps ensure that defense expenses are recognized without delay and allows insureds to access insurers’ claims resources from the outset. Prompt notification also reduces the risk of coverage disputes later in the process.

Renewal strategies for better outcomes

For real estate companies to obtain the best available coverage in the marketplace, Lockton recommends:

• Early engagement. Begin renewal discussions at least 120 days in advance.

• Leveraging analytics. Catastrophe modeling, valuation benchmarking, and portfolio analysis are all helpful in negotiating terms and conditions at renewal.

• Highlighting risk mitigation efforts. Insureds that can demonstrate they have effective loss control programs, incident response plans, litigation strategies, and more can often realize more favorable outcomes at renewal.

• Considering alternative risk transfer options. Real estate insurance buyers can finance their risks in several nontraditional ways. Captives, structured excess programs, and parametric solutions for perils such as flood, wildfire, and hail all offer ways in which companies can supplement their traditional insurance programs.

• Explore stand-alone coverage. Where liability coverage is difficult for abuse/molestation and assault and battery exposures, companies should work with their broker to prepare detailed submissions and tap into specialty markets.

• Partner with an experienced broker. Specialist advice and guidance on policy language and structure can help real estate companies realize better outcome at renewal and more effectively manage their risk.

For more information or for help managing your insurance program, visit our real estate page (opens a new window)or contact a member of the Lockton Real Estate team.