Property Insurance Is Rewriting Multifamily Underwriting

Insurance has moved from a predictable expense assumption to a variable that can change the entire shape of a multifamily deal. For years, it sat quietly inside the operating expense section of the model. Investors reviewed the current premium, applied a standard annual increase, and then turned most of their attention to income growth and exit pricing.

The old sequence no longer works. Premiums can move quickly enough to pressure multifamily NOI and valuation before the rest of the deal has time to perform. In markets exposed to climate risk or carrier pullback, insurance has moved closer to the center of the investment thesis.

Strong markets can still offer compelling opportunities when investors underwrite the real cost of risk with precision from the start. Brookings recently found that average commercial property insurance premiums for multifamily properties grew more than 15% annually from 2019 to 2024, with nearly 30% growth in 2023 alone. Over that same period, insurance costs roughly doubled as a share of rental income and operating expenses. 

Premiums Are Changing the NOI Math

Multifamily values are built from net operating income (NOI), so expense growth can quickly become valuation pressure when revenue doesn’t keep pace.

CBRE has estimated that higher insurance costs have reduced multifamily property values nationally, with sharper effects in certain Sun Belt markets. Houston and Jacksonville were among the markets most affected in CBRE’s analysis, which is important because both remain attractive from a demand and population-growth perspective. Demand is still strong in those markets, but investors need to price the full cost of ownership with more precision.

Older underwriting habits carry more risk in this environment. A model that assumes insurance will grow at a normal inflationary pace may overstate NOI, especially in markets where insurers are repricing exposure or reducing capacity. A buyer who misses that risk may think they are buying a yield story when they are really buying an expense problem.

Gilberti Group brings insurance into multifamily underwriting early because it can shape pricing, reserves, and return expectations. Beyond the current premium, we look at renewal risk, deductible exposure, and signs of insurance friction so a lower purchase price is measured against the real forward cost of ownership.

Florida Shows the Value of Local Insurance Underwriting

Florida is often the headline example for rising multifamily property insurance costs, but the more useful lesson is how local the risk has become. Strong demand can still support attractive multifamily opportunities, but insurance now varies meaningfully by asset quality, location, construction, and carrier appetite.

A property near the coast can underwrite very differently from one farther inland, even within the same metro. Building age, roof condition, elevation, and claims history can also change the insurance profile before rent growth or exit pricing enters the model.

The Federal Reserve has noted that average property insurance costs per unit are much higher in Florida and along the coasts of Louisiana and Texas than in many other parts of the country. It also found that rising insurance costs can flow through to rents over time, although the pass-through is not always immediate. 

For operators, that makes local underwriting more valuable. The opportunity is strongest when the cost of risk is understood early, priced accurately, and reflected in the asset plan from day one.

Better Property Insurance Underwriting Creates an Edge

Rising property insurance costs are creating a clearer advantage for operators who underwrite risk with discipline and precision.

When a major expense line becomes harder to predict, top-down underwriting loses value. The edge moves to investors who understand the market at the asset level and can price risk before it shows up in the model. In that environment, local knowledge and disciplined diligence can separate strong opportunities from deals still relying on outdated assumptions.

Strong operators can respond in practical ways. They can evaluate building systems before closing, price capital improvements with insurance in mind, work with experienced brokers early, and consider how deductibles affect cash management. They can also decide when a discount is attractive enough to compensate for higher ownership costs and when the pricing still does not reflect the risk.

Insurance pressure is helping the market price risk more clearly, creating an advantage for investors who understand it early. Investors who understand that signal can make better decisions about basis, hold period, reserves, and exit value.

Gilberti Group believes that this environment rewards precise multifamily underwriting. A deal should work after the real insurance cost is included, not before. The asset should have enough income strength and operating flexibility to absorb volatility without depending on perfect rent growth.

Multifamily remains one of the most durable real estate asset classes, and durability still requires precision. Property insurance has become a core underwriting variable, shaping risk, pricing, and long-term returns across multifamily deals.

To discuss how property insurance risk is shaping multifamily underwriting and acquisition strategy, schedule a conversation with Gilberti Group.