Colorado businesses face soaring insurance costs

Colorado businesses are grappling with a new kind of climate crisis: the soaring cost of property and casualty (P&C) insurance.

Unlike the direct impact of fires or floods, this crisis is an economic one, forcing companies to reconsider their growth strategies as premiums skyrocket and carriers pull back from the market.

Business leaders across the state are finding that the financial fallout from severe weather is now as damaging as the events themselves. The primary culprit is the increasing frequency and severity of hail and wind damage, which has driven massive losses for commercial properties.

As a result, insurance companies are tightening their underwriting rules or, in some cases, exiting the Colorado market entirely, leaving businesses with fewer options and higher costs.

A ‘hardening’ market

The situation is what insurance experts call a “hard market,” characterized by reduced capacity, more restrictive terms and significant premium increases.

For Colorado, the market is particularly challenging because of its unique weather patterns. The state has experienced an increasing number of billion-dollar disaster events in recent years, with hail and windstorms being a major driver of commercial property claims. This trend has made Colorado a high-risk state for insurers, who are passing the costs onto their business clients.

The impact is far-reaching. Companies that once saw Colorado as a prime location for expansion are now weighing the long-term financial stability of operating in the state.

According to Ryan Daniele, senior vice president of strategic marketing at The MJ Companies, insurance volatility is not just an expense; it’s a threat to business growth.

“We’re seeing companies that had planned to expand or add new locations now putting those plans on hold,” Daniele said. “They’re being forced to choose between paying an unsustainable premium and scaling back their operations. The competitive edge Colorado once had is being eroded as companies look to neighboring states with more stable risk profiles.”

Other factors pushing up rates

Compounding the problem is that the state’s population has exploded over the past two decades. Denver’s population has increased from 2.2 million in 2005 to nearly 3 million people this year, according to Macrotrends. Statewide, the population increased from 4.6 million in 2004 to nearly 6 million in 2024.

“There’s more development housing businesses with outdoor assets, meaning there’s more exposure to incidents,” Daniele said.

Inflation also is a factor that’s pushing up insurance rates, with the cost of materials and labor rising every year.

“If you have a building that gets hit by a hailstorm and you need to replace the roof, both material and labor costs have increased every year for the last five to seven years,” Danieles said.

“All of these are factors that influence total cost. We’ve seen a 10% or more increase in costs for a number of years running.”

Strategies for survival

While the market is challenging, experts say businesses are not powerless. Daniele suggests that a proactive approach to risk management can help companies stay protected and competitive. This includes:

• Investing in mitigation: Businesses can make their properties more resilient to weather events. Installing hail-resistant roofing materials or reinforced windows can reduce potential damage and may lead to lower premiums.
• Improving underwriting profiles: Businesses should work closely with their brokers to present the most comprehensive and favorable risk profile to insurers. This includes maintaining meticulous records of safety protocols and property maintenance.
• Exploring alternative markets: With some traditional carriers leaving, businesses may need to explore options in the surplus lines market or other specialty insurers who are willing to take on higher-risk properties.

The escalating cost of commercial insurance is a symptom of a larger problem. As climate-related weather events become more frequent, the economic reverberations are being felt not just by homeowners but by the businesses that form the backbone of Colorado’s economy.

“For Colorado, it’s about how we best protect our people and assets,” Daniele said. “You can’t change the weather. You have to live with it. Businesses need to be more aware when they’re looking to start a new project. Are they protected from wildfires? How do you protect your roof? How do you build a building with better materials to have a better chance of withstanding that hailstorm?”