Boston Harbor
Boston property owners and developers have a lot of risk to contend with, including historic buildings with aging infrastructure, extreme weather events, and a changing regulatory framework for both new and existing structures.
For those seeking to safeguard their assets from these issues and more, the complexity of the property insurance market can seem overwhelming, says Brooks Finnegan, a senior advisor at insurance brokerage NFP, an Aon company.
“Understanding these trends can help commercial real estate professionals make informed decisions about their insurance needs,” Finnegan said. “By partnering with NFP, commercial real estate professionals gain a trusted advisor that can secure tailored coverage to manage risk, ensure compliance regardless of geography, and effectively control cost.”
Finnegan walked Bisnow through the unique aspects of Boston’s property insurance market and how NFP helps commercial real estate owners and investors leverage insurance for their benefit.
Bisnow: What are some of the unique risks facing Boston’s commercial real estate market?
Finnegan: One of Boston’s most significant challenges from an insurance perspective is the age of its buildings. While architecturally significant, visually stunning and beloved, these historic buildings often saddle their owners with elevated maintenance costs and are more vulnerable to fire, water damage or structural deterioration.
The proximity to the waterfront introduces risks related to flooding and storm surge, especially as climate change intensifies these threats. Properties in flood-prone areas must invest in resilient design features and secure adequate flood insurance, which has become increasingly expensive.
Urban density heightens liability concerns with the constant flow of pedestrians and vehicles increasing the likelihood of accidents near or on commercial properties. Moreover, the concentration of high-value properties means that even minor incidents can result in significant losses and require solutions that prudently balance cost and coverage.
Boston’s role as a hub for innovation and education, while fueling the city’s overall economy, creates challenges for property owners serving these high turnover populations, leading to inconsistent revenue streams and fluctuating occupancy rates.
Bisnow: What are commercial real estate insurance premiums headed, and what’s driving this trend in Boston specifically?
Finnegan: It’s no secret that insurance premiums for Boston’s commercial real estate have been rising in recent years. Boston’s booming real estate market has led to higher property values, which in turn translates to increased insurance costs. But rising property values alone are not the only culprit.
First, the increasing frequency and severity of natural disasters have made insurers more cautious, leading to higher costs for coverage. Boston’s coastal proximity, for example, places many properties at risk of flooding and storm damage, and insurers build this exposure into their policies.
Second, the rising cost of construction materials and labor has driven up the expense of rebuilding, which insurers must account for when determining premiums. Supply chain disruptions have further exacerbated these costs and will be an area to watch under the current U.S. administration with targeted tariffs expected.
Finally, the growing emphasis on sustainability and energy-efficient buildings has introduced new considerations for insurance providers, as properties with advanced systems may require specialized coverage or underwriting accommodations.
While insurers remain vigilant in risk selection and deductible levels, particularly for properties with wind and water exposure, there are reasons to be hopeful. The property insurance market has been stabilizing recently as insurers reenter the marketplace, increasing competition and coverage options. NFP expects more predictable costs and better policy availability for its clients over the next 12-18 months.
Bisnow: What regulatory or legislative changes should Boston’s property owners and investors have on their radar?
Finnegan: Two significant regulations stand out: the MBTA Communities Law and BERDO 2.0. The MBTA Communities Law mandates zoning changes to encourage higher-density housing near transit stations.
While this aims to alleviate the housing shortage, it also increases the complexity of development projects. Developers must navigate zoning amendments, address infrastructure demands and manage potential community resistance, all of which can impact timelines and budgets.
BERDO 2.0, the Building Emissions Reduction and Disclosure Ordinance, is equally transformative. This regulation requires large buildings to progressively reduce carbon emissions, aligning with Boston’s climate goals. Compliance demands substantial investments in energy-efficient systems, renewable energy integration and emissions monitoring. Non-compliance carries hefty penalties, making it essential for property owners to prioritize these upgrades. These changes also influence insurance, as retrofits and new systems may require bespoke coverage.
Beyond these, stricter flood zone requirements and updates to building codes aimed at resilience against climate change have added layers of compliance. Tax incentives for historic preservation and energy-efficient buildings also play a role, encouraging sustainable practices but complicating financial planning.
Bisnow: How does NFP help commercial real estate professionals with their insurance needs?
Finnegan: At the core of NFP’s approach is a deep understanding of the unique risks and challenges in the commercial real estate market like Boston.
NFP begins by conducting comprehensive risk assessments of property portfolios, ensuring that every potential exposure, from flood risks in coastal zones to liability concerns in high-traffic commercial spaces, is identified and addressed.
As one of the largest global insurance brokers, we enjoy access to a broad network of insurance providers and insurance-adjacent solutions. This allows us to source competitive rates and customize coverage options to meet clients’ needs.
Whether it’s securing specialized coverage for an aging Boston property undergoing BERDO 2.0 compliance retrofits or finding cost-effective policies for high-value assets, NFP’s brokers are adept at aligning coverage with evolving market demands.
Beyond policy placement, NFP offers ongoing support by regularly reviewing and updating coverage as properties are acquired, sold or renovated. Brokers serve as advocates during the claims process, navigating complex procedures to ensure timely resolutions and optimal outcomes. NFP also keeps clients informed about regulatory changes, helping them adapt proactively to new requirements like the MBTA Communities Law.
This article was produced in collaboration between Studio B and NFP. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
