Zurich Resilience Solutions Replacement Value Cost Trends

Real Property * Personal Property

Zurich Resilience Solutions (ZRS) is committed to providing experience and insights to help customers and producers better understand and prepare for the evolving risks they face over time. This issue of ZRS’s Replacement Value Cost Trends provides the results of the most recent real and personal property inflation survey conducted for Zurich. The cost trends are published to assist in maintaining proper levels of insurable replacement costs for commercial and industrial properties. Please consult insurance advisors for specific information regarding your situation. The cost trends are issued annually but may be issued at mid-year if market conditions warrant.

January 2023 Cost trends analysis

The current building cost trends continue to show an unprecedented increase in construction cost inflation for the year ending January 2023 with an average increase of 12.90% for the year. Regionally costs increased in the range of 7.6% to 21.2% based on local conditions. Non-residential business volume through 2022 has started to increase and appears to be in an upward trend into 2023. There continues to be a labor shortage especially in the skilled labor market which is increasing higher wage demands. Material costs were at a high at the beginning of 2022 but has started to stabilize at the end of the year, however they are still up an average of 9.5% for the year. Supply chain issues and high costs of key materials continue to be main drivers of inflation. Additionally, the war in Ukraine has had an effect on non-residential construction costs.

The personal property cost trends indicate a 2% to 10% increase in machinery and equipment costs for the listed occupancies over the prior 12-month period. Supply chain issues and inventory shortages are causing some increases in machinery and equipment costs. The main driver of an increase in personal property cost trends is inflation.