Insurance, Development Risk & The Hidden Economics Of Real Estate With Lisa Holt – RFP 90

For most of the past century, commercial real estate operators treated insurance the way they treated utility bills: an unavoidable cost that crept up a little each year but never seriously threatened the math on a deal. That era is over.

In Episode 90 of The Real Finds Podcast, Gordon Lamphere sits down with Lisa Holt, founder of Ivy Risk, to dissect how insurance markets actually work, why premiums have surged at a pace that surprises even seasoned operators, and what developers, investors, and property owners need to understand if they want to protect returns in the decade ahead. The conversation surfaces a harder truth: insurance is no longer a passive line item. It has become a live underwriting variable with the power to make or break a deal.

How We Got Here: The Insurance Market Hardening

Insurance markets have always been cyclical. Capital flows in during profitable stretches, competition increases, and premiums soften. After a run of significant losses, carriers pull back capacity and rates harden. Real estate operators have ridden that cycle for generations.

What changed over the last five years was the speed and scale of the correction. Natural catastrophe losses compounded year over year. Replacement costs spiked with construction inflation. Global reinsurance capital repriced. The result was one of the sharpest market hardening periods in modern memory, with many property owners watching premiums double or even triple within a single renewal cycle.

That kind of cost movement is not an administrative nuisance. It is a financial event. Insurance sits directly inside net operating income, which means it flows through debt service coverage ratios, valuation models, and ultimately the returns delivered to investors. Operators who once budgeted modest annual increases are now stress-testing scenarios that would have seemed implausible in 2018.

For a broader look at how cost pressures are reshaping asset strategy across property types, see our analysis of the six commercial real estate trends shaping 2026.

Why Development Risk Is a Different Problem Entirely

One of the more instructive parts of Lisa’s practice is her focus on development-stage insurance, and it reveals how differently insurers think about projects that do not yet exist.

An operating building gives an underwriter something to evaluate: construction type, occupancy history, maintenance records, claims experience. A development project gives them a set of promises. Will the general contractor perform? Will draws stay on schedule? Will the capital stack hold together through entitlement delays or material cost overruns? Insurers covering a development are essentially underwriting the competence and credibility of the team as much as the property itself.

That has direct implications for developers. Experience matters in ways that go beyond securing financing or winning municipal approvals. A strong development track record, a disciplined construction management process, and a stable financing structure all translate into tangible insurance pricing advantages. Less experienced developers or projects with complex capital stacks may face higher premiums, coverage gaps, or carriers unwilling to write the risk at any price.

If you are evaluating multifamily development opportunities in Northern Illinois, our team works through these feasibility questions regularly. See our overview of multifamily development and redevelopment landsites for current opportunities and deal structuring context.

Asset Class Risk Is Not Created Equal

The insurance market does not treat all property types the same, and the divergence has widened over the past several years.

Multifamily has been among the hardest-hit sectors. The combination of high tenant density, heavy foot traffic, and the sheer volume and variety of potential claims — water intrusion, slip-and-fall incidents, habitability disputes — creates a claims frequency profile that insurers find difficult to price conservatively. Liability exposure in residential environments is broad and often unpredictable, and carriers have responded with both higher premiums and tighter coverage terms.

Industrial properties have generally fared better. Simpler building designs, lower occupancy density, and more straightforward operational profiles tend to produce more manageable claims histories. That said, the asset class is not immune. Older industrial facilities with deferred maintenance or hazardous material exposure carry their own risks, and as the Chicago industrial market has tightened and rents have risen, the replacement cost implications of major losses have grown considerably. For current context on how the industrial sector is performing across Northern Illinois, see our Q1 2026 Chicago commercial real estate market update.

Office presents a more complicated picture. Building age, tenant mix, occupancy levels, and the ongoing structural challenges facing the broader office sector all factor into how carriers evaluate the risk. Properties with high vacancy and deferred capital investment tend to draw less favorable terms. For a look at where the office market stands and how repositioning strategies are playing out, our piece on the foreclosure future of office spaces provides useful context, as does our podcast episode on why most landlords get office design wrong.

Geography Is Pricing, Not Background

Insurance pricing has always reflected location, but the geographic dimension of risk has become significantly more pronounced.

In markets like South Florida, hurricane exposure has pushed some carriers out of the market entirely. Wildfire zones across the western United States have seen coverage become difficult to obtain at any price. These are the well-publicized cases. Less appreciated is what has happened across the Midwest, including Northern Illinois.

Convective storm losses, such as severe thunderstorms, hail, and tornadic wind events, have grown materially as a share of insured catastrophe losses. The Midwest has historically been viewed as a lower-risk geography relative to coastal markets, and that perception has shaped how local operators budget for insurance. That assumption now warrants revision. Midwest properties are seeing more frequent and more costly storm events, and carriers are adjusting their models accordingly.

For investors acquiring properties in Northern Illinois or Southern Wisconsin, geographic risk is no longer a line item footnote. It is a diligence variable that belongs in the same conversation as tax exposure, lease structure, and deferred capital needs.

What Strong Property Management Actually Does for Insurance Positioning

One of the most actionable takeaways from this conversation is that property owners are not passive recipients of whatever the insurance market delivers. The quality of operations at a property level genuinely influences how carriers evaluate the risk — and what they charge for it.

Well-maintained buildings with documented inspection and maintenance programs, proactive capital improvement schedules, and effective tenant management tend to have better claims histories. Insurers underwrite probability, and a property where problems are caught early, repaired promptly, and documented consistently presents a materially different risk profile than one where deferred maintenance accumulates and claims arrive as surprises.

This is not incidental to how we approach commercial property management at Van Vlissingen and Co. Operational discipline, responsive maintenance, regular inspections, proactive capital planning protects asset value on multiple fronts simultaneously. It supports tenant retention, preserves the physical asset, reduces liability exposure, and, over time, produces a claims history that gives insurers reason to price a property favorably. Properties that demonstrate that kind of stewardship tend to see insurance positioning improve at renewal rather than deteriorate.

Technology is accelerating this dynamic. As Lisa notes in the episode, advances in predictive analytics and AI are giving carriers the ability to evaluate property-level risk with increasing granularity. Owners who invest in data-driven operational practices will increasingly find that their insurance positioning reflects the quality of those systems. For more on how AI is reshaping property operations, see our post on AI’s growing role in commercial property management.

Alternative Risk Structures: When the Traditional Market Is Not the Answer

For larger owners and institutional investors with sufficient portfolio scale, the traditional insurance market is not the only option.

Captive insurance structures have become an increasingly serious topic among sophisticated real estate operators. A captive is essentially a purpose-built insurance company owned by the insured, allowing a portfolio owner to retain risk internally rather than transferring it to a third-party carrier at prevailing market rates. When combined with disciplined risk management and a claims history that reflects genuine operational quality, captive structures can reduce long-term insurance costs significantly. In favorable years, retained premiums generate a return rather than disappearing into a carrier’s income statement.

These structures are not appropriate for every owner. They require sufficient premium volume to make the economics work, and they demand operational discipline to justify the self-retention of risk. But for larger operators managing diversified portfolios, they represent exactly the kind of strategic financial thinking that separates sophisticated investors from passive ones. As industry consolidation continues reshaping who controls large commercial portfolios, the owners best positioned will be those who manage every cost layer with the same rigor, a dynamic explored in our piece on what CRE industry consolidation means for investors and building owners.

The Strategic Shift

The fundamental change Lisa Holt describes is a philosophical one as much as a financial one. Insurance has moved from an administrative function to a strategic variable. Developers who do not account for insurance in feasibility modeling are building on incomplete assumptions. Investors who treat insurance as a stable line item in acquisition underwriting are mispricing risk. Property owners who manage buildings reactively and then wonder why premiums keep rising are missing the connection between operations and cost.

The owners who will navigate the next cycle most effectively are those who approach insurance the way they approach financing: as something to actively manage, optimize, and integrate into long-term asset strategy from day one.

Van Vlissingen and Co. has served commercial property owners across Northern Illinois and Southern Wisconsin since 1879. If you are evaluating a new acquisition, a development project, or the long-term management strategy for an existing asset, our team is available to discuss how operational practices and market positioning work together to protect value. Reach out to our commercial real estate agents who serve the greater Chicagoland market to start the conversation.