In July we wrote about the hotel property market softening. That is still true. The development worth your attention in the second half of 2026 is structural, and it is happening on the liability side of the same renewal.
Carriers are not writing large single layers of hotel liability anymore. Programs that used to sit as one $10 million layer are being reassembled out of smaller pieces, from more carriers, and the price of getting the tower filled is often an exclusion.
What the Q3 Market Reports Actually Say
IMA’s Hospitality Markets in Focus for Q3 2026, published July 30, describes a bifurcated market: property pricing falling, casualty climbing, limits shrinking, and some lines difficult to place at all. On program structure, the report is specific — placing higher limits on a single layer has become challenging, so programs are rebuilt into smaller towers, often with sexual abuse and molestation (SAM) exclusions attached. It also notes that dropping from a $10 million limit to a $5 million limit may shave only about 15% off rate.
That last number is the one to sit with. Cutting your limit in half does not cut your premium in half. It buys you a modest discount and doubles the size of the loss you keep. If you are being offered lower limits as “savings,” price it out before you accept it.
Amwins’ State of the Market 2026: A Focus on Hospitality describes the same split: property has shifted decisively in favor of buyers, while liability capacity stays constrained by social inflation and nuclear verdicts, with carriers re-evaluating attachment points, reducing available limits, and imposing exclusions that materially affect coverage quality. Risk purchasing groups have been pulling back from hospitality, which removes options for operators who relied on program structures.
Gallagher’s real estate and hospitality update and The Baldwin Group’s 2026 mid-year hospitality report add the loss drivers: assault and battery, SAM, human trafficking, firearms, liquor liability, and habitability claims — bedbugs, mold, Legionella, carbon monoxide. Third-party litigation funding, now an estimated $16 billion industry, keeps severity climbing. In July 2025, the first reported jury trial of a Trafficking Victims Protection Reauthorization Act claim against a hotel produced a $40 million verdict.
Why Abuse Coverage Became the Sticking Point
SAM underwriting for hotels has gotten granular in a way that surprises owners. Per the IMA report, carriers are scrutinizing anything that draws families and children — arcades, pools, kids’ clubs, spas. For spa operations, underwriters are asking about the gender mix of massage staff and the specific anti-abuse training in place. Human trafficking exposure is being excluded outright in some markets, and the question of who bears fault between owner, operator, and franchisor is unsettled.
The result is a market where the coverage most likely to produce a catastrophic claim is the coverage most likely to be missing from your tower. Many owners do not know it is missing, because the exclusion arrives as an endorsement form number on a renewal that otherwise looked flat.
Six Things to Verify at Your Next Hotel Renewal
- Find out whether SAM is excluded, sublimited, or covered — on every layer. A primary policy that includes SAM does you limited good if the excess layers above it exclude it. Ask for the exclusion form numbers on each layer in writing.
- Price a monoline abuse policy even if you think you’re covered. Standalone SAM capacity exists. Knowing the number lets you compare it against the size of the exposure instead of guessing.
- Do the limit math instead of taking the discount. If $10 million to $5 million saves roughly 15%, calculate what your actual dollar savings is and whether you would accept a $5 million uninsured loss for that amount.
- Check assault and battery and liquor liability separately. Both are being sublimited or excluded, and both are commonly tied to demonstrated security protocols. If your bar revenue is a meaningful share of total sales, standard markets may step back entirely.
- Document the training and the incidents. Underwriters are pricing on evidence of mitigation: written screening procedures, documented staff training, guest-incident logs, camera coverage, key-control policy, and how the front desk escalates a welfare concern. Operators who can prove mitigation are the ones getting terms.
- Do not treat umbrella limits as a commodity. The identical $5 million of stated limit can be structurally different across two proposals depending on attachment point, exclusions, and which carrier sits in which layer.
FAQ
Are hotel insurance rates going up or down in 2026?
Both, depending on the line. Property has softened meaningfully for well-maintained, non-catastrophe-exposed assets, while general liability and umbrella pricing has continued to rise, with liability limits harder to place.
What is a SAM exclusion?
A sexual abuse and molestation exclusion removes coverage for claims alleging abuse or molestation. It may appear on a primary policy, on excess layers, or both, and it often removes defense costs as well as indemnity.
Why would a carrier exclude human trafficking coverage?
Severity and unsettled liability. Following the 2025 TVPRA verdict against a hotel, some markets have chosen to exclude the exposure rather than price it.
Does a lower limit really only save 15%?
That is the figure reported for moving from $10 million to $5 million in the Q3 2026 IMA hospitality analysis. Your own number depends on structure and loss history, which is exactly why it should be quoted both ways.
Get the Exclusion List Before You Sign
Send us your current liability program — every layer, with endorsement schedules. We will build you a one-page map showing where SAM, assault and battery, liquor, and trafficking coverage exists and where it stops. Hotel and hospitality has been one of our core specialties for decades, and this is the year that map is worth having before renewal instead of after a claim.
Call Donegan at 830-303-8300 or visit donegan.com.
Sources
— A5
- IMA Financial Group — Hospitality Markets in Focus, Q3 2026 (July 30, 2026) — https://imacorp.com/insights/hospitality-markets-in-focus-q3-2026
- Amwins — State of the Market 2026: A Focus on Hospitality — https://www.amwins.com/resources-and-insights/market-insights/article/state-of-the-market-2026–a-focus-on-hospitality
- The Baldwin Group — 2026 Real Estate & Hospitality Mid-Year State of the Market (July 29, 2026) — https://baldwin.com/insights/hospitality-industry-report/
- Gallagher — Real Estate and Hospitality Market Update, Spring 2026 (PDF) — https://www.ajg.com/-/media/files/gallagher/us/files/2026/real-estate-and-hospitality-market-update-spring-2026.pdf
- Hotel Executive — “Finding Adequate Hotel Insurance Coverage: Why It Could Get Harder” — https://www.hotelexecutive.com/feature_focus/8553/finding-adequate-hotel-insurance-coverage-why-it-could-get-harder
