Property Insurance Coverage: Positioning Assets

Insurance modeling and pricing are opaque processes. Our clients have seen natural hazard insurance rates rise by upward of 200% for certain hazards, with carriers withdrawing coverage altogether in some markets. National Multifamily Housing Council (NMHC) recently hosted a webinar to review the results of the NMHC | 2023 NMHC State of Multifamily Risk Survey & Report providing a key finding that, like it or not, everyone who owns property is in the risk management and loss control business.

Disruptions in Insurance Coverage Could Lead To

According to information provided by Christine Chipurnoi of USI Insurance, disruptions in coverage due to shortage of available capacity in the insurance and reinsurance markets could lead to:

Incumbents pulling back or not offering existing limits or capacity.
Limits required may not be available, at ANY price.
Lender requirements may not be met due to lack of availability or much higher deductibles. Lenders are reportedly being inundated with requests to waive loan covenants and are digesting a significant uptick of loans being in technical default due to lack of coverage.

As an Asset Holder, What Can You Do?

USI shared with AEI several ways to position your assets for insurance coverage:

Building updates are critical to underwriting. Building violations and outstanding risk control recommendations could cause non-renewal so owners should address these issues proactively, and document the actions that were taken.
The top loss area in property insurance is water damage, whether from natural hazards or water leaks. Document the natural hazard mitigation measures that are in place, as well as any leak sensors or Moisture Management & Mitigation Plans.

Preparing for Pending Insurance Renewals

At AEI, we’re helping our clients prepare for pending insurance renewals at the portfolio and property level:

At the Portfolio Level: We help document and implement your risk management, loss control and capital planning program. We assist you to identify and mitigate risks through operationalizing risk management activities during acquisition and management of your properties. We augment your due diligence activities to include consideration of natural hazard risks and building maintenance concerns, and we help you manage these concerns during ownership through facility condition assessments, Probable Maximum Loss calculations, valuation of replacement costs, mitigation activities, capital planning, and on-site training and planning.
At the Property Level: We help you track property specific data in a format that can be shared with insurers. We provide site specific engineering evaluations and help you act on the information. Insurers use desktop models to predict the risk, and if they are lacking certain data points, they will use default values that provide “worst case scenario” results. We help you proactively provide building data regarding building condition that arms you and your broker to approach the market with a compelling story. Augmenting the insurer’s data with better information helps them make an informed decision about coverage. We help you document and track property upgrades so you can proactively provide that information to your broker.

Final Thoughts on Positioning Your Assets for Property Insurance Coverage:

Over the last couple of years, we’ve fielded many questions about whether implementation of resilience measures at a property will result in lower insurance costs. The clear answer from the NMHC panel was no – resilience measures won’t get you better pricing. Today, hazard mitigation may be simply a prerequisite to receiving a quote for coverage. AEI’s in-house property condition experts can help you proactively demonstrate your risk management and loss exposure approach. We look forward to assisting you and your broker to advocate for coverage.

If you would like help identifying environmental hazards or could benefit from hazard mitigation reach out to speak with one of AEI’s consultants today.

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