Strong renter demand for apartments may not be enough to entice insurers to cover multifamily properties; rather, insurability hinges on valuations, safety and operational discipline, according to Marsh McLennan’s new report Real Estate Risk and Resilience for 2026.
The recent building boom has cooled rent prices and led to an uptick in concessions, though it has not affected all segments of the housing market equally, according to the New York City-headquartered finance and insurance firm. It found the market “softening is most noticeable in newer Class A buildings, while affordable and workforce housing remain structurally undersupplied.” Still, core drivers for multifamily remain strong.
At the same time, many owners are finding that renter demand doesn’t always translate to insurance and lender confidence, and liability availability is limited, per the report. Multifamily portfolios, especially those in higher-crime or plaintiff-friendly areas, now mostly get their general liability and umbrella coverage from specialty insurance markets, where pricing is higher and coverage may be more restrictive.
“A property coming off its final loan extension in 2026 may look financially stable on paper, but an undervalued replacement cost, a history of water-damage losses, or outdated security measures can stall refinancing or lead to costly coverage requirements,” according to Marsh McLennan.
“This is one reason deal volume is rising even as pricing gaps remain wide—some assets can’t clear lender or insurance hurdles without resetting valuations or recapitalizing.”
What’s changing in multifamily insurance
Today, insurance coverage for multifamily assets has almost entirely shifted to the surplus market, where terms are tighter, limits are lower and assault and battery and sexual abuse and molestation are often excluded, according to Marsh McLennan. Those exclusions create direct financing risks.
“Agency lenders, such as Fannie Mae and Freddie Mac, require A&B [assault and battery and SAM [sexual abuse and molestation] coverage for loan compliance; however, many insurers no longer offer these protections, especially for aging, affordable, or higher-crime properties,” the researchers wrote.
“The result is a growing gap between what lenders require and what the insurance market provides, forcing owners to restructure deals or absorb significant premium and retention increases.”
Affordable housing developers find this a particularly difficult hurdle, since tax credits — often the backbone of financing for such projects — can easily be lost.
“Under IRS rules, if a Low-Income Housing Tax Credit (LIHTC) unit is uninhabitable on the last day of the year, the owner can lose an entire year of credit for that unit, even if the loss is covered,” per the report. “A specific Tax Credit Endorsement is increasingly needed to protect LIHTC value after a loss.”
How to manage multifamily risk
Underwriters are looking at operational execution across the multifamily sector, according to Marsh McLennan. Deferred repairs, aging systems, inconsistent documentation, crime exposure and weak access control are key factors that negatively affect insurability.
Multifamily owners, REITs and investors must align operations, documentation and capital planning so insurance supports the business plan, rather than constrains it, per the report. Key steps include thoroughly analyzing loss history and ensuring that contracts with vendors and contractors are strong and comprehensive.
“Owners who maintain accurate valuations, document repairs, strengthen security practices, and address maintenance issues proactively are finding it easier to secure coverage, meet lender requirements, and negotiate more competitive terms—even in a constrained liability market.”
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