How Companies Can Navigate the Latest Trends in Commercial Property Insurance

Rising Property Claims Levels and Costs

According to GlobalData, UK commercial property claims frequencies fell during the 2020–21 lockdowns and have since broadly returned to pre pandemic norms. Aon’s proprietary claims analytics for UK commercial property show a similar pattern in claim counts but with a marked increase in average cost per claim relative to 2019, reflecting elevated reinstatement and construction costs. This is consistent with Aon’s wider catastrophe and property loss research, which highlights rising loss severity per event as a key driver of insured property losses globally.

This rise in costs can be attributed to construction cost inflation in materials and labour, as well as longer repair times and higher alternative accommodation / business interruption (BI) costs. In turn, these factors have pushed up UK commercial property gross written premiums (GWP) which grew by nearly 19% over 2023 and 2024, driven largely by inflation in rebuild costs as well as soft market placing conditions which can make the claims landscape more challenging, despite improvements in some claim frequencies.

Main Loss Drivers

• Water leaks and internal damage
  Recent market analysis shows a near 40% increase in escape of water claims costs in 2023, even as some other claim types fell. Contributing factors to this trend include ageing properties and outdated plumbing/roofing; cold snaps followed by thawing; and unoccupied or partially occupied buildings (due to post COVID working patterns) where leaks can go unnoticed for a long period of time.
• Weather and climate related losses
  Weather remains a key volatility driver, especially storm and wind damage, flooding and burst pipes and roof failures due to “freeze-thaw” conditions. According to the Association of British Insurers, weather related property claims (domestic and commercial) in the UK reached nearly £1 billion in the first nine months of 2025. This pattern appears to be replicated within Europe in relation to storm and wind damage.
• Fire and large loss severity
  Fire remains a consistent peril, particularly for industrial risks (manufacturing, warehousing, waste/recycling) and older retail/heritage buildings. Rising costs for materials, specialist trades and regulatory standards (e.g., cladding, fire protection) significantly push up average fire claim sizes.
• Increased dilapidation claims
  Dilapidation claims costs following termination of tenant leases appear to be increasing. In part this is due to increased labour and materials costs but increasingly these seem to exceed the contractual terminal dilapidation cost limits, leaving the landlords with a shortfall. Securing new tenants remains problematic for some landlords who are seeking cash settlements rather than full like-for-like reinstatement to mitigate against loss of rent claims.

What Your Business Should Consider

• Install systems that can limit the severity and impact of weather events, by providing early detection of escaped water or smoke. Aon Risk Consultants can help in identifying suitable systems, many of which are approved by insurers and may positively impact premiums.
• Consider investing in resilience measures: roof maintenance, drainage, valves and leak detection, surge and lightning protection, and robust fire detection/suppression will mitigate against loss.
• Ensure the sums insured and indemnity periods reflect the value of your buildings, contents, stock and likely length of business interruption.
• Where properties are unoccupied, check your policy wording to understand the unoccupancy clause and any action that needs to be taken to ensure appropriate cover remains in place.
• If properties are unoccupied during cold weather conditions, drain down water systems where possible to prevent bursts when frozen pipes thaw.
• Dilapidation costs are usually excluded. Regular inspections will find issues and allow for early enforcement of any obligations for the tenant to carry out repairs. A schedule of condition agreed at the beginning of the lease will mean any subsequent defects or damage can be easily identified. Legal expense policies can be arranged to help with costs associated with contractual disputes unresolved at the end of a tenancy.

Inflation, Valuation and Underinsurance

Underinsurance is now a central theme in claims negotiations. Sources suggest that number of UK commercial properties that are underinsured could exceed two thirds. The drivers behind this underinsurance include rapid increases in rebuild costs since 2020 – with 2025 data showing a 3.8% increase over the previous year – as well as property owners not regularly updating declared values or relying on outdated desktop valuations.

The impact on claims is the use (or threat) of average / co insurance clauses by insurers; coverage disputes over whether policies are on day one, reinstatement, or indemnity bases and how indexation is applied. The result is larger uninsured portions of what otherwise would be covered losses.

What your business should consider

• Professional building valuations should be undertaken at regular intervals to avoid inadequate declared values and underinsurance with rebuild costs assessments ideally carried out every two to three years.

Sector Differences in Business Interruption

BI claims have fallen since their peak, with some studies pointing to a near 50% decline in BI driven gross claims in 2022. Current BI exposures are more around extended repair times due to contractor/material shortages and supply chain disruption after major property losses.

On a sector-by-sector basis, retail, hospitality and leisure are still seeing elevated claims from vandalism, escape of water and fire in partially occupied/high street premises. For warehousing and logistics, large fire and storm roof claims are prominent, with higher severity losses due to values of stock and increased property sizes. While offices are experiencing lower claims frequency in some portfolios due to improved security and occupancy management, but higher severity when fires or major escapes of water occur in high rise or mixed use assets.

What Your Business Should Consider

• Ensure the indemnity period for BI cover is adequate. At a minimum, we would recommend a 24-month indemnity period as any sizeable loss is unlikely to be fully reinstated within 12 months.

Market Dynamics and Why This Matters for Claims

UK commercial property gross written premiums grew 15% in 2023 and a further 3% in 2024, mainly from rate and indexation rather than pure exposure growth. Record high property insurance payouts across domestic and commercial lines in 2024 and 2025 have reinforced insurer focus on technical adequacy of rates and deductibles.

Insurers have therefore set more stringent requirements on a range of measures including up to date reinstatement cost assessments; flood, storm, and fire protection measures; and vacancy/occupancy controls and leak detection. In addition, carriers are using granular hazard mapping and data (e.g., flood depth, crime risk, construction type) to refine terms and deductibles.

What Your Business Should Consider

• Increasingly we are seeing coverage disputes related to where fire or flood policy conditions have not been fully complied with. Ensure that you are familiar with any conditions or exclusions attaching to your policy or seek advice from your broker.
• Aon has a specialist coverage claims team who can assist with any challenges from insurers involving policy coverage and support you where there are legitimate challenges to be made against insurers.

Operational / Claims Handling Trends

From an operational perspective, insurers are making greater use of remote assessment (drones, video, digital evidence) for storm and minor water damage, as well as preferred repair networks to control inflation and quality, and data and analytics to spot potential fraud or systematic leakage.

There is also an increased push towards settling straightforward commercial property claims quickly to reduce BI and reputational impact and encouraging risk improvement as a condition of renewal after major losses (e.g., roofing upgrades, sprinklers, leak detection sensors).

In response to many of the climate-driven changes in weather-related damage, such as flooding and subsidence, insurers are looking at repairs that mitigate the severity of future losses. Many of these initiatives are marketed as resilience or “Build Back Better” programmes.

Where policies involve more complex placement arrangements involving coinsurance arrangements, payments traditionally needed to be obtained from each insurer for their proportion of the loss. We are aware that eight of the major insurers Aon collaborates with are consulting with the ABI to formalise an agreement that the lead insurer can issue payment on behalf of all co-insurers to expedite settlement.

Some of Aon’s loss adjusting partners can use insurer funded direct payment accounts. This allows for quicker interim payments to pay contractors and avoid delays associated with policyholders settling accounts and waiting for reimbursement.

What Your Business Should Consider

• Invest in resilience: roof maintenance, drainage, valves and leak detection, surge and lightning protection and robust fire detection/suppression.
• Keep good documentation (maintenance, upgrades, occupancy changes) to support smoother claims handling.

Operational and claims handling risk

As insurers tighten cost control and settlement efficiency, changes in claims handling processes are reshaping speed, evidencing requirements and policyholder responsibilities, with implications for cost, BI exposure and dispute risk.

How Aon Can Help

We work with clients to navigate the complexities of the current property and property owners’ insurance market. Our role goes beyond insurance placement – we help clients understand the drivers of claims inflation and translate this into actionable strategies, offering tailored risk solutions, analytics and expert claims support to reduce costs and improve outcomes.

We support clients with:

• Data-driven insights – analysing claims trends to identify emerging risk factors and areas for intervention.
• Risk management solutions – helping design and implement programmes to address and mitigate against the main drivers of property claims.
• Access to in-house claims preparation experts to help quantify and manage property material damage and business interruption losses.
• Market advocacy – positioning clients’ risk profiles with insurers to secure the most competitive terms in a market where premiums remain under pressure.

By combining technical expertise, market intelligence and tailored risk management support, we help organizations to not only manage rising claims costs but also improve their overall resilience in a rapidly evolving environment.