The hospitality insurance market is facing a major shake-up, with fewer carriers willing to cover industry risks, skyrocketing premiums, and increasingly restrictive underwriting. One of the biggest trends is consolidation, with niche brokers being bought out by larger brokerages, said award winning wholesale broker David DeLorenzo (pictured), CEO of Ambassador Group Insurance.
This shift is leaving bar and restaurant owners in a difficult spot. Many establishments that once had a reliable set of insurance options are now struggling to find carriers willing to underwrite their policies.
“Smaller brokers, who have specialized in hospitality insurance for years, are retiring, and when they’re gone, a lot of the personalized service goes with them,” he said.
It’s not just that some carriers have consolidated or shut down - it’s that many no longer have the appetite for the hospitality industry, particularly in states like Arizona, where litigation has become a major issue.
“We’re seeing more lawsuits, and we’re seeing social juries out there awarding these big settlements,” he said. “That’s making carriers nervous.”
For hospitality business owners, the reality is clear: insurers have tightened their underwriting standards, and any establishment with even a hint of elevated risk is facing steep challenges.
“The biggest challenges I have are establishments that have anything fun,” DeLorenzo said. “If you have a dance floor, if you have any games on the premise, if you serve that last drink late at night - those things are all red flags to underwriters right now.”
Lease requirements are also adding to the pressure. Many bars and restaurants are now required to carry umbrella policies with multi-million-dollar limits, pushing insurance costs even higher.
“If your lease requires you to have a $5 million umbrella, you might be looking at an extra $50,000 a year,” he said. “Not because you necessarily need it, but because the lease said you have to have it.”
Even when a policy gets approved, DeLorenzo said underwriters are increasingly engaging in “back-end underwriting,” where they approve a policy only to cancel it weeks later.
“They’ll give you a rate, then 30 days later come back and say, ‘We don’t like this about it,’ even though it fit their criteria originally,” he explained. “Now, you’re stuck scrambling for coverage, and suddenly your premium jumps 30% to 40% because you have to go excess and surplus.”
Given these mounting challenges, DeLorenzo sees risk management as the best way for bars and restaurants to protect themselves and maintain access to affordable insurance. That means implementing strict loss control measures, investing in staff training, and proactively addressing risks before they become claims.
“What’s great about being a niche broker is that I’ve seen these patterns play out over and over again,” he said. “The best thing hospitality owners can do is show underwriters they’re a good risk.”
DeLorenzo also advises clients to consider higher deductibles to offset rising premiums.
“In Arizona, we don’t have a lot of property-heavy claims,” he said. “So, I tell people to take a higher deductible on property, save some money there, and focus on liability coverage where you really need it.”
Beyond this, he sees negotiation as a key tactic - particularly with landlords who set high insurance requirements without fully understanding the impact on tenants.
“A lot of these landlords are big investment groups out of New York,” he said. “They don’t know the laws in different states, and they don’t always understand how coverage works. You can negotiate with them to bring down some of these requirements.”
Despite the difficulties, DeLorenzo is optimistic that technology will help improve conditions in the long run.
“We’re coming to a precipice. There are programs being developed that will utilize camera technology and other tools to give clients more than just a piece of paper that covers them when something goes wrong,” he said.
One of the biggest game-changers, he believes, will be the ability to document incidents in real-time. He expects that as these technologies become more widely adopted, insurers will be able to bring loss ratios down and re-enter the market with more competitive rates.
“If you can catch an incident as it happens and document it properly, you’re going to save millions in frivolous claims,” he said. “Once you can guarantee a certain reduction in loss ratios, you’re going to see more carriers come back in,” he said.
DeLorenzo, who has spent 25 years specializing in hospitality insurance, is determined to push for changes that will stabilize the market.
“I’m on a crusade to get this mitigated,” he said. “When I look at the fact that 10 years ago, I was writing a risk for $50,000 and now the same risk is $150,000 - it doesn’t add up.”
He attributes much of the increase to data-driven underwriting models that don’t always reflect the reality of operating a hospitality business.
“These models are looking at every claim that’s ever happened in a certain location, and suddenly, it’s deemed high-risk even if nothing has happened at your specific business,” he said.
His solution? A more nuanced approach to underwriting - one that factors in proactive risk management and individual business practices, rather than just blanket data trends.
“The industry needs to evolve,” he said. “We need underwriting that’s more intuitive and responsive, rather than just numbers in a spreadsheet.”
For now, hospitality owners are left navigating an increasingly unforgiving insurance landscape. But if DeLorenzo has his way, that won’t be the case forever.
“Insurance shouldn’t just be a pot of money for attorneys,” he said. “It should be about real protection for businesses that are doing the right things.”
