The hotel and restaurant insurance market is not changing because of a single disruption, but because of sustained pressure. Weather losses continue to mount, liability exposures are expanding, and standard carriers are pulling back from risks they once considered manageable. For hospitality operators, the result is a more constrained market where excess and surplus lines coverage is no longer a last resort, but an essential part of the risk transfer strategy.
“There are really two sides of the coin,” said Tim Smith (pictured), national hospitality practice leader at IMA Corp. “There’s the property side, covering the asset, and then there’s the liability side. Both have become more challenging, but for different reasons.”
On the property side, Smith said persistent weather-related losses remain the dominant force reshaping underwriting appetite. Convective storms, wind and hail across the Midwest and Southeast, along with escalating wildfire exposure in California, continue to drive carrier retrenchment. “With the continued weather-related claims, whether it be convective events or wildfires like we saw early in January in California, those continue to be a challenge,” he said.
In some regions, availability has become a more significant issue than price. Smith pointed to wildfire-exposed areas of California, where restaurants and hotels may struggle to find any admitted market capacity. Even where coverage remains available, the terms have shifted materially. “Over the last five years, there’s been a growing deductible increase,” he said, noting that insureds are increasingly required to retain more risk through larger fixed deductibles or percentage-based deductibles that were once uncommon outside coastal catastrophe zones.
For restaurant and hotel operators, higher retentions have remained a strain, but momentum in the property market is turning. Smith said that a strong 2025 loss year has prompted new capacity and capital to flow back into the sector, softening conditions more quickly than many expected. As underwriters compete to retain and win business, he anticipates broader appetite, sharper pricing, and improved terms emerging into 2026.
If property risks are being shaped by climate volatility, liquor liability is being defined by scarcity. Smith said securing liquor liability coverage has become one of the most consistent challenges for hospitality clients, particularly for restaurants and hotels where alcohol sales represent a meaningful share of revenue. “Liquor liability continues to be a challenge, again, to even secure coverage or find markets that are willing to provide it,” he said, adding that standard carriers often step back once liquor revenues exceed 25% to 30% of total sales.
As a result, operators are increasingly forced to rely on standalone liquor liability placements or full E&S programs. At the same time, exclusions tied to security-related exposures are becoming more common. “Active shooter and assault and battery exclusions are more commonplace today than ever,” Smith said, noting that these provisions are often poorly understood by insureds.
“We come across insureds often that have an assault and battery exclusion or abuse and molestation exclusions,” he said. “Some insureds don’t know that those exclusions are there, and they effectively nullify any claim opportunity.” In hotels, those exclusions can also intersect with trafficking-related allegations, further increasing exposure if coverage is not carefully structured.
Despite tighter capacity and more restrictive underwriting, Smith said client demand for specialized guidance has increased. As risks move into the E&S market, hospitality operators are placing greater value on brokers who understand where capacity still exists and how to negotiate coverage terms. “When we’re competing against a generalist that doesn’t know how to source the particular carriers or where to find the best markets in the E&S space, that’s where we’ve grown pretty dramatically,” he said.
That specialization has become even more important as hospitality concepts themselves evolve. Smith pointed to the growing overlap between dining, entertainment and nightlife, which introduces new underwriting considerations. He cited venues that operate as family-oriented attractions during the day and transition into nightlife environments in the evening. “You mix liquor into the equation, and that’s a different kind of underwrite than just your standard restaurant bar,” he said.
Some of the most significant challenges Smith encounters are not outright coverage denials, but gaps that insureds do not realize exist. Beyond assault and battery or abuse and molestation exclusions, he highlighted pollution exclusions as a frequent blind spot in hotel insurance programs. “Hotel operators might think, ‘We don’t have any pollution issues at the hotel,’” Smith said. “You read the fine print, and it includes fumes from hot water heaters and HVAC systems.”
Carbon monoxide exposure from venting failures, he added, represents a serious but often overlooked risk. The good news, Smith said, is that many of these exclusions can be addressed through negotiation. “Often you can negotiate with underwriters to get these covers back,” he said. “Maybe it’s additional premium, maybe it’s just a simple ask.”
The larger issue for 2026 is liability severity. Smith expects continued upward pressure on general liability and umbrella pricing, driven by nuclear verdicts and third-party litigation funding. “When you think about premises liability and restaurants and hotels being squarely in that guest liability space, we have a lot of exposure there,” he said, adding that legislative reforms in some states are a step in the right direction.
