Abstract
<title>Abstract</title> <p>How much does property insurance cost for commercial real estate, and does climate risk shape that cost? We study insurance expenses for more than 137,000 properties backing commercial mortgage-backed securities from 2010 to 2023. Unlike homeowners insurance, coverage in this setting is mandated by loan covenants and subject to less regulation, limiting selection and allowing prices to move with risk. Our findings suggest that property insurance costs rise sharply after 2018 across all major property types, increasing from about 5% to 8.5% of operating expenses and growing roughly twice as fast as homeowners insurance costs over the same period. Within metropolitan areas, a one-standard-deviation increase in expected natural-hazard losses is associated with approximately 4% higher insurance costs. Using a stacked difference-in-differences design, we compare properties within counties affected by natural disasters with those in adjacent, unaffected counties and find that insurance costs rise by 3.1% over the following three years, reaching 6.5% by year three. The effects are strongest where climate exposure, realized losses, and insurer financial strain are greatest, and in states with fewer geographically diversified insurers and more lenient rate regulation. JEL Classifications: G22; Q54; R11; R31; R33</p>