How is Florida insurance affecting CRE underwriting in 2026?

Florida property insurance is the most significant underwriting variable in Florida commercial real estate that receives the least attention from buyers who have not previously owned property in the state. Getting this wrong does not just affect your returns. In some cases it has made deals technically unfeasible that looked attractive on paper.

The context: Florida's property insurance market has been under severe stress since 2022, driven by the combination of Hurricane Ian's $113 billion in losses, Hurricane Nicole, Hurricane Idalia, and Hurricane Helene, together with a structural problem in the reinsurance market — global reinsurers have repriced Florida exposure materially upward, and many domestic insurers who could not afford the new reinsurance costs have exited the state or reduced their commercial writings significantly. The result is a market with fewer carriers, higher premiums, and in some cases significantly higher deductibles or wind exclusions for coastal-adjacent assets.

For commercial property investors, the practical effect is this: insurance that would have cost $0.30–$0.45 per square foot annually three years ago now commonly runs $0.55–$0.90 per square foot for well-maintained inland industrial and retail assets. Coastal or coastal-adjacent properties with storm surge exposure can run $1.20–$2.00 per square foot or more, with wind deductibles of 2%–5% of insured value that effectively mean the property owner self-insures the first $100,000–$500,000 of storm damage depending on building value.

For underwriting purposes, the critical change is that you cannot use the seller's historical insurance expense as your proforma assumption. Sellers in Florida frequently present trailing insurance costs that were locked in under older policies or carrier relationships that no longer exist at those rates. You need a current insurance quote — from an actual Florida-licensed commercial carrier — before you finalize your acquisition underwriting. This is not a recommendation. It is a discipline requirement for anyone buying Florida commercial property in 2026.

The NNN lease structure question is also worth addressing explicitly. In a pure NNN lease, the tenant pays property insurance as a pass-through cost — so on a stabilized, fully leased NNN asset, your exposure is limited to the underwriting risk of whether the tenant can absorb the current insurance cost without hardship that leads to a default or lease termination negotiation. For assets with near-term lease expirations, the risk is different: when you renegotiate the lease, the tenant will be aware of the current insurance market and will push back on uncapped insurance pass-throughs more aggressively than tenants signed leases five years ago. Many sophisticated tenants now negotiate annual insurance pass-through caps of 5%–10% year over year — which means the landlord absorbs any increase above the cap.

For value-add investors acquiring partially vacant assets, the insurance cost on vacant square footage is your problem, not the tenant's. Budget for it as a real carry cost in your business plan. For investors underwriting ground-up development in Florida, the construction period insurance requirements have also increased materially — builders risk policies for Florida commercial projects now commonly include wind coverage riders that add 20–35% to the premium.

The geographic dimension matters. Central Florida (Orlando MSA) sits far enough from both coasts that its commercial insurance market is meaningfully more competitive than coastal South Florida, the Tampa Bay coast, or the Jacksonville beaches. Inland industrial in Orange, Osceola, and Lake Counties is the best-positioned asset class from an insurance-cost standpoint — which is one more structural reason the Orlando industrial market attracts out-of-state institutional capital that has decided to reduce coastal exposure without exiting Florida entirely.