Soaring insurance premiums are impacting the South Florida real estate market, with some developers putting major projects on hold despite soaring demand for residential and commercial properties.
The Wall Street Journal reported Tuesday that many developers behind skyscrapers and apartment communities have pulled the plug on their projects as insurance premiums soar and inflation costs and interest rates rise.
A San Antonio development executive who was planning a large apartment complex in South Florida told the Times that even a 30% rise in insurance premiums in recent months could ruin the deal.
Three years ago, insurance costs were about 2% of the total project cost; today they are about 8%. This includes a builder’s risk insurance that covers damage while the building is being constructed. Liability Insurance; Construction Defect Coverage; Property and Casualty Insurance after Construction Completion.
Florida is notorious for insurance claims lawsuits. This has been called the factor behind rising property insurance premiums and insurance company bankruptcies. However, construction defect lawsuits are also on the rise in the state. the journal reportedAfter the condominiums at Champlain Towers South collapsed in 2021, the Condominium Association is under renewed pressure. Many condominium boards began hiring engineers to inspect the building after it was completed, and if a defect was found, the association could sue if the developer didn’t fix it, he said. A construction lawyer told the newspaper.
The Champlain Tower collapse, which killed 98 people, impacted insurance companies and costs in another way. One lawsuit alleges that a high-rise building was built next to a collapsed condominium, destabilizing the structure. Insurance companies now have to prepare for claims not only from the insured property, but also from adjacent properties, explains his New York-based developer Ian Bruce Eichner.
Many developers have had to use multiple insurance companies to cover a single property. Property insurance premiums are also expected to rise in the wake of Hurricane Ian, with an estimated $40 billion in insured losses. It can get worse quickly.
Lockton insurance broker Fred Zutel told the newspaper that all factors make Florida the most difficult environment to procure insurance.
A special session of the Florida legislature, scheduled for December 12-16, may address some of the cost drivers for insurers, including litigation and reinsurance. But industry analysts say it could take a year or more for the changes to take effect.
Photo: Champlain Towers South building collapsed in 2021 (AP)
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