Accurate property values are vital in a changing climate

The commercial property insurance market remains in transition in 2026, with the likelihood of an ongoing, strongly competitive environment through the end of the year and beyond. The current competitive picture is in part fueled by lower-than-anticipated global natural catastrophe losses in 2025 – $107 billion actual versus an estimate of greater than $140 billion at the beginning of the year.¹  And thanks to a 2025 hurricane season generating fewer than predicted landfalls in densely populated commercial areas, capital available in traditional reinsurance and alternative markets means competitors will likely continue to pursue aggressive goals prioritizing growth over long-term risk improvement and profitability.

But the market environment of 2026 is unfolding against a backdrop of intensifying property risks represented by “secondary peril” weather events – convective storms generating more frequent tornadoes, damaging hailstorms, powerful straight-line winds and pluvial flooding in areas not historically prone to such events. Adding to the litany of costly, climate-related perils are more frequent and catastrophic wildfires driving increasingly costly insured losses and recovery costs. On a global basis, secondary perils accounted for a record 92% of insured catastrophe losses in 2025.² By one estimate, severe convective storms have become the costliest insured perils of the 21st century.³

For commercial property insurance customers, the message is clear. The quality of the Statements of Values at the core of every commercial property insurance contract has never been more important in catastrophe modeling, underwriting and post-loss recovery and resilience.

Why accurate values matter

Ensuring a commercial property is accurately valued on a replacement cost basis helps insurers, brokers and customers support better catastrophe modeling, stronger underwriting decisions and more realistic recovery planning. If loss estimates are off due to inaccurate values, a significant exposure may be left unidentified, likely resulting in an unplanned retention or underinsured loss. Accurate valuations help determine appropriate limits, deductibles and risk improvement priorities, while also reducing the chance of underinsurance, unexpected retentions and claims friction.

Accurate values also help risk engineering teams assess the true scale of exposure across buildings, equipment, inventory and business income. When those values are current, customers are better positioned to make informed resilience investments and develop loss-mitigation plans reflecting today’s operating realities.

Staying abreast of loss trends

Monitoring loss trends and their impacts on valuations is foundational in supporting sustainable risk management decisions, risk improvement investments and resilience planning. This is especially true at a time when the climate and natural catastrophe outlook is in a state of transition.

Zurich’s own approach is data-driven, continuously evaluating actual losses compared to engineered Probable Maximum Loss (PML) assumptions to verify our estimates are staying ahead of emerging trends. To assist, we created a project to confirm our engineered PML estimates are globally consistent and are influenced by the trends we see with actual losses.

For example, one of the trends we have identified as historically understated is smoke damage, including variables by occupancy. Based upon this insight, we encouraged the National Fire Protection Association (NFPA) to change the code requiring new parking garages to be sprinklered. The intent is to reduce the impacts of toxic smoke damage in attached/adjacent parking structures due to the evolving risks associated with plastics in vehicles (including fuel tanks), lithium-ion batteries, and charging stations. This recommended code change has now been implemented by the NFPA.

Staying on top of emerging loss trends, and adjusting Statements of Values accordingly, is also especially critical at a time when advanced technologies present businesses with risks which may not be fully reflected in traditional valuation methodologies. Modern facilities increasingly contain heavy concentrations of leading-edge technologies and digital assets. AI-augmented systems, building automation (“smart buildings”), Internet-of-Things (IoT) capabilities, data center dependencies and electrification infrastructure, such as battery storage and EV charging, represent significant values to the organization, as well as significant potential for physical and business interruption losses. As such, they need to be fully addressed within any Statement of Values during insurance and risk management discussions.

 More than an annual exercise

At a time of economic volatility, maintaining accurate property values requires more than an annual renewal exercise. In 2026, customers continue to navigate elevated labor costs, volatility in the cost of construction materials, ongoing supply-chain disruptions in some sectors as well as longer restoration timelines after major loss events. According to the insurance industry data-analytics firm Verisk, U.S. commercial reconstruction costs increased 4.1% from April 2025 to April 2026.⁴ This could mean property schedules not refreshed recently may no longer reflect a facility’s true replacement costs.

With material and labor costs trending higher at a time of increasing frequency and severity in severe weather events, underwriters are paying closer attention to the quality and consistency of Statement of Values data. If a company’s values remain flat year after year despite inflation, facility upgrades or changes in operations, it may be logical to question whether the schedule still reflects the customer’s actual risk. Given the current business environment, valuation accuracy becomes as much a data-quality issue as it is an insurance issue.

Zurich Resilience Solutions (ZRS) is committed to helping customers and brokers understand current replacement cost trends to better prepare for recovery following a loss event. Each year, ZRS publishes an updated Replacement Value Cost Trends report providing the results of a survey evaluating the impacts of real and personal property inflation on replacement costs across the U.S. The goal is to assist businesses in determining proper levels of insurable replacement costs for commercial and industrial properties. Click here to visit a page where you can download the 2026 report.

Asking the right questions

During the process of reviewing and updating Statements of Values, there are a number of questions customers and brokers will find helpful in making sure all of the organization’s assets and exposures are addressed within the document.

Some of the questions risk managers need to consider are:

• When were our values last updated?
• Do they reflect current replacement costs by location?
• Have code-upgrade costs been considered?
• Do business interruption assumptions reflect current restoration timelines?
• Have new equipment, technology systems or operational changes been incorporated?
• Are supply chain dependencies and labor constraints reflected where relevant?

In summary, developing an accurate, comprehensive Statement of Values is no longer just an administrative task in the risk transfer process. It is a key part of the strategic planning necessary to ensure recovery readiness, underwriting confidence and long-term resilience. Customers need to work closely with brokers, underwriters and risk engineering professionals to review all relevant values and potential risks, pressure-test business interruption assumptions, and use current replacement-cost benchmarks to help keep property programs aligned with today’s rapidly changing risk environment.

For additional insights visit Zurich Property Insights Collection.

References:

1. “2025: A year of hailstorms, fire and high water.” Swiss Re. 2026.
2. Ibid.
3. “Severe Convective Storms Now the Costliest Insured Peril of the 21st Century, Aon Reports.” Aon Mediaroom. 20 January 2026.
4. “360Value Q2 2026 Quarterly Reconstruction Cost Analysis.” Verisk Analytics. 2026.