Why the real estate insurance model must evolve

THOUGHT LEADERSHIP BY JASON GRIESSEL, Head of Cushman & Wakefield | BROLL Strategic Risk Services.

The cost of insuring South Africa’s built environment is more than a line item – it has become a systemic pressure point. As premiums climb year on year, the financial burden doesn’t stop at landlords’ doorsteps. It filters down to tenants, retailers and ultimately to every consumer navigating a shopping mall, in fact, every taxpayer.

This isn’t merely a sectoral squeeze. It’s economic inefficiency. Escalating insurance costs inflate operating margins, strain competitiveness and threaten sustainability and growth.

If resilience is the true measure of sustainability, then our current insurance paradigm is failing the test.

When risk perception outpaces reality

At the core of the issue is a global-local misalignment. South African risk is largely written by offshore reinsurers, primarily British and European syndicates, who apply models that often fail to reflect lived realities on the ground. Political unrest, for instance, triggered abrupt cover withdrawals in the past. Sasria stepped in, but at a long-term fiscal cost.

This points to a deeper issue: perception is distorting price. With global reinsurers “holding the pen”, underwriting power lies far from the assets themselves. The outcome? Inflated premiums based more on global volatility sentiment than data-driven local risk profiles.

Closed loops and captive markets

This is exacerbated by little transparency and even less competition. Infrastructure assets are predominantly reinsured offshore, not due to lack of local capacity, but because entrenched relationships and legacy pathways dominate decision-making.

Even real estate financing structures are part of the inertia. Banks often recommend, and can even mandate, insurer preferences, locking property owners into high-margin ecosystems that reward status quo over strategic review. With a captive market, innovation is muted and efficiency sidelined.

When taxpayer-funded government buildings are included in this model, the call for transparency and data-driven risk profiles becomes more than financial, it becomes an ethical and fiscal imperative.

Insurance as a strategic lever

Cushman & Wakefield | BROLL modelling indicates there are achievable savings of 8% to12% in insurance premium expenditure through better communication, strategic alignment and more sophisticated data engagement. For a REIT paying, say, R 80 million in insurance premiums annually, that translates to R8,75 Million in year-one relief alone.

In an economy constrained on every side, where more marketing promotions or parking revenue increases can only take you so far, insurance stands out as one of the last controllable costs for property. Yet most CFOs are hesitant to touch it. The fear of post-crisis blame looms large, and so a ‘don’t’ fix it if it isn’t broken’ attitude ensures outdated models persist under the guise of prudence.

So, how do we break the cycle?

Unless we challenge the model, we remain bound by it. Change starts with asking some tough questions:

• Why aren’t we diversifying our reinsurance sources, for instance into Asia, to inject competitive pressure?
• Why do we accept decades-old syndicate defaults without contest?
• Why has the sector resisted innovation in data and risk structuring?

These questions are calls to action. We’re not suggesting burning bridges, but we are endorsing building better ones. The real estate insurance of the future must be data-forward, enabling and locally aligned.

There’s a valuable opportunity for leading landlords to redefine risk as a strategic enabler, and shift insurance to a board-level conversation rather than an admin expense.

For those still in wait-and-see mode, consider this: regulatory tightening, investor scrutiny or another market shock could force change faster than you’re ready for.

Those who act quickly will do more than save millions, they’ll be pioneering a smarter, fairer way to price, share, and manage risk across South Africa’s built environment.