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Commercial property insurance in a hardening market: PJ&C can ensure the right coverage

As it is to almost everything related to the economy, trends are also significant for insurance. These trends, on a macro scale, ebb and flow with widespread risks, or the lack of risks. The expert advisers at Pepper, Johnstone & Company prioritize these trends; moreover, we make it a point to keep our clients informed. 

Right now there are tectonic shifts taking place in commercial property trends. With the risks and costs of building on the rise, the need for commercial property insurance has rarely been greater. Let’s take a look at the major reasons why, and what you can do to protect yourself from liability. 

Hardening Of The Market: Commercial Property Insurance

In the early stages of the pandemic, we published a blog about the hardening of the insurance industry. Some of this had and still has to do with COVID-19, but not all. In fact, most of it began far before COVID-19 ever entered our collective consciousness. 

Several factors preceded the market’s hardening, such as increasing natural disasters, and the end of a broader low-risk cycle. But the pandemic did hit commercial business in particular, which significantly and specifically accelerated the hardening of the commercial property insurance market. 

Let’s take a look at how the pandemic helped the hardening, along with the larger forces at play. 

Commercial Property Language Is Tightening

These two things may not sound directly related, the pandemic and commercial property risks. While businesses across the country shut down, the properties themselves have not and cannot be damaged by an invisible virus. Since 2006, insurance carriers have included exclusionary policy language as grounds to deny property and business income claims resulting from any virus, bacteria, or microorganisms. 

Moving forward, given the number of business interruption lawsuits filed across the US, we can expect insurance carriers to modify the exclusionary language to be even more specific regarding pandemic-related claims. The risks of protracted court battles and the potential for large judgments will tighten policy language in an effort to minimize policy interpretation and ambiguity. The ensuing restrictions on coverage, as we will detail more below, are just some of many elements of the hardening commercial property market. 

The Increased Cost Of Construction Are Carried Forward

COVID-19 has indirectly caused property construction costs to skyrocket, which in turn affects the payouts of claims on commercial property insurance. (A general boom in construction nationwide is also contributing to these increased costs.)

Insurance, like everything in the market economy, is priced relative to other goods and services--particularly those goods and services that fall within the same industry or sector. When the cost of construction rises, so do the necessary reimbursements on occurrences against commercial property insurance. To put it in perspective, the cost of lumber alone has risen more than 300%; thus, rebuilding becomes far more costly.  

The Hardening Started Long Before The Pandemic

Let’s remember, the hardening of the insurance market began far before the coronavirus struck. In truth, the pandemic simply added fuel to the proverbial fire. 

Increased frequency and severity of disasters and catastrophes started a domino effect. It’s true that these risks are regional, and the occurrences often, but not always, localized. And yes, these areas have seen commercial property rates increase by as much as 400-500%. In the meantime, businesses exposed to less risk might have seen rates rise by as little as 5% year over year. 

But claims across the country can affect the premiums in your backyard. As the cost of claims rises, so do premiums. But as the premiums rise, the capacity of carriers decreases (meaning they take on fewer businesses); claim limits crash, sometimes as much as 50% (maximum reimbursement amounts are much lower); and all the way down the line, liquidity in the insurance market itself dries up (meaning this cycle becomes self-perpetuating). In a hardened market, these factors lead to diminished underwriting, leaving more commercial properties without coverage. 

Pepper, Johnstone & Company Can Keep You Covered

In a hardened market, it’s imperative that you maintain coverage. This goes doubly for when the market hardens during a pandemic that leaves commercial buildings littered with vacancies. Because it’s not just dollar amounts that have tightened. Where commercial property insurance had been expanding its coverage, we’re now seeing narrowing. Commercial property policies that used to boast broader language that included elements like cyber coverage are now restricted to the bare essentials. 

That’s why working with an independent insurance agency such as Pepper, Johnstone & Company is so important. With premiums on the rise and carriers turning inward, you want to make sure that you are getting the most coverage you can for every dollar spent. Our experienced insurance advisers will customize a commercial property package that meets your needs without breaking the bank at an especially difficult time for business owners and managers. 

Most importantly, we here at Pepper, Johnstone & Company will accept nothing short of total coverage for your business. We work directly with policymakers to ensure the best coverage for our clients. Many can say this, but as a local independent agency, our relationships with providers pay dividends. We have been working with certain insurance companies for decades, and we leverage these close-knit partnerships to the benefit of you and your business. 

Pepper, Johnstone & Company -- Professional insurance advisors who just happen to sell insurance products too!


We are entering an extraordinary time for commercial property insurance. With all the difficulties ahead, you need an insurance adviser that you can count on to ensure that your business is fully covered. Our independent insurance experts work with each client on an individual basis, curating policies that cover you for as much risk as possible. You can request an online quote here. You can also visit us on our website or call at 256-232-7818 to get us working on a quote for you today.