The California multifamily and commercial real estate market has been facing one of its most challenging insurance landscapes in decades. Rising premiums, carriers pulling out of the state, and tightening underwriting guidelines have left many property owners and investors wondering: what can be done to protect their assets without breaking the bank?
In a recent episode of SoCal Multifamily Insights, host Jack Patel sat down with Zack Iknadosian of INM Insurance Services to dive into the state of the insurance market, what owners and buyers need to know, and how to mitigate risk in this volatile environment.
The Insurance Market Tightens
Over the last three to five years, insurance has become a pressing issue for multifamily and commercial investors in California. According to Iknadosian, a big shift started around 2015 when wildfires and natural disasters began causing billions in claims. Carriers that had comfortably insured properties for decades suddenly pulled back or left the market entirely.
“From 2005 to 2015, premiums didn’t really move much. It was business as usual,” Zack explained. “But once the wildfires and property losses hit, carriers started paying out six-figure and even million-dollar claims. They realized they weren’t collecting enough in premiums to offset the losses, so they tightened underwriting — or stopped writing certain classes altogether.”
This means that even long-term owners who have never filed a claim are being lumped into a higher-risk category simply because of the class of business they are in. Multifamily properties, especially older ones, are being scrutinized more closely than ever.
Why Premiums Keep Rising
Many investors are shocked to see premiums doubling or tripling within a few short years. Jack pointed out a common complaint from owners: “I’ve had this property for 20 years, no claims, and suddenly I’m being hit with huge premium increases. Why?”
The answer, Zack noted, comes down to the overall performance of the insurance class. Even if one owner has no claims, the carrier looks at multifamily as a whole. If losses are high across the category, everyone pays.
To make matters worse, carriers are demanding updates. Roofs, electrical systems, plumbing, and HVAC all need to be modernized to qualify for better rates. Properties without proof of updates in the last 20 years are often forced into “non-admitted” markets with higher costs and less favorable terms.
What Buyers Should Watch Out For
For those in acquisition mode, insurance considerations are now critical to underwriting a deal. Iknadosian advises buyers to pay close attention to building systems and condition.
“Roofing and electrical are the two big ones. If those are old or outdated, carriers will either decline coverage or hit you with expensive premiums,” he said.
Buyers should also be wary of visible risks like cracked pavement, trip hazards, peeling paint, or neglected maintenance. Well-kept properties are more attractive to insurers and can open the door to more competitive markets.
Selling Older Properties
Many Southern California buildings are 50, 60, or even 100 years old. For owners considering a sale, insurance can become a sticking point. Sometimes a carrier will renew for an existing owner but refuse to insure the buyer.
Sellers who want a smooth closing should address deferred maintenance and system upgrades before listing. Otherwise, they risk price cuts or credits at escrow when the buyer can’t secure affordable coverage.
How Long Do Buyers Have to Fix Issues?
One common question is how much time a new buyer has to correct flagged issues like outdated panels or roofing.
According to Zack, inspections usually happen within 3–4 weeks of binding a policy, and carriers issue reports within two more weeks. Buyers then typically get 30 days to comply, though in practice they may have up to 60–90 days before facing cancellation.
Should You Shop Multiple Brokers?
In the past, investors often shopped dozens of brokers to find the best deal. Today, that can actually backfire.
“All brokers generally have access to the same carriers,” Zack explained. “If you blast it out to 20 agents, it can actually hurt your chances. It’s better to work with one broker who will truly remarket your policy every year and push for competitive quotes.”
Admitted vs. Non-Admitted Carriers
California distinguishes between admitted carriers (backed by the Department of Insurance) and non-admitted carriers (excess and surplus lines, or E&S).
Admitted carriers offer stronger protections if an insurer goes bankrupt, but they have to file rates with the state — limiting flexibility. Non-admitted carriers can raise or lower rates more freely but do not have the same backing.
For many older multifamily properties, admitted carriers are no longer an option. Owners are left with non-admitted markets, which may provide less comprehensive coverage but are often the only available choice.
The Temptation to Self-Insure
With premiums skyrocketing, some owners consider self-insuring. Jack shared a story of a client whose premium jumped from $4,000 to $18,000 annually, leading him to consider dropping coverage entirely.
Zack warned that this is risky. “Unless you’re flush with cash, self-insuring exposes you to catastrophic loss. Even wealthy clients usually prefer to be fully insured — sometimes even over-insured — to protect their assets.”
Replacement Cost Disputes
Another pain point for owners is replacement cost. Carriers often estimate rebuilding at $225–$250 per square foot — numbers that don’t align with California’s real-world costs, especially with permitting, code upgrades, and labor.
While owners can commission their own replacement cost estimates, most carriers rely on internal calculators that exclude factors like ADA compliance or city fees. Owners should add ordinance and law coverage to protect against these additional costs.
Where the Market is Heading
Despite the challenges, Zack sees some stabilization. Premiums aren’t rising quite as sharply as they were in 2023–2024. However, volatility remains.
“Some new carriers are entering California, but they’re reaching capacity quickly because demand is so high,” Zack explained. “It’s almost like burning through carriers. They come in, write a ton of policies, and then pause when they hit their limit. We’ll have to see if more stable players step in over the next few years.”
Key Takeaways for Investors
1. Expect higher premiums — even with no claims — due to statewide class performance.
2. Update major systems (roofing, electrical, plumbing, HVAC) to qualify for better rates.
3. Work with one broker who will remarket your policy annually.
4. Plan insurance early when buying or selling; it can make or break deals.
5. Consider ordinance & law coverage to handle code upgrades and compliance.
6. Avoid self-insuring unless you can truly afford catastrophic loss.
Final Thoughts
California’s insurance market is in flux, and multifamily owners are paying the price. But with proper planning, property updates, and the right broker, investors can still navigate this environment successfully.
As Zack put it: “You want to make your property look the best it can. That way you not only get better premiums, but also protect your investment long-term.”
For more insights, check out the full conversation with Jack Patel and Zack Iknadosian on SoCal Multifamily Insights.
👉 Reach out to Zack Iknadosian https://www.inminsurance.com/staff/zack-iknadosian/
👉 Reach out to Jack Patel at 213-453-2572
