It’s mercenary, we know, but one person’s crisis has always been another’s opportunity. That’s certainly the case when it comes to the U.S. housing crisis.
With home mortgage rates rising, demand for single-family residences, whether new or existing, has fallen. But apartment construction activity has been booming, with no sign of a slowdown despite inflation-fueled rising costs for land and materials.
In other words, Americans who can’t afford higher mortgages are renting, making it a good time to be in the apartment development and investment business.
Securing insurance coverage that doesn’t leave apartment owners and investors feeling exposed or wondering what they’re really paying for is another matter.
If you’ve been in the business for a while, you know that the commercial property insurance market has steadily “hardened” in recent years, resulting in quarterly rate increases since the fall of 2017.
Wildfires and flooding, among other catastrophic events, are largely to blame, driving up the frequency and size of claims and, thus, premiums.
As we predicted in our 2022 Market Report and Forecast, some apartment owners this year are struggling to find coverage at all. When they do, they’re seeing double-digit rate increases, higher sub-limits, and a host of exclusions — especially those related to losses tied to weather exposures.
Anyone with high-risk operations with poor loss-control practices or properties in disaster-prone areas may encounter even sharper rate increases, higher retentions and lower coverage limits.
Slips and falls, swimming pool accidents and assault and battery incidents don’t help.
With all that in mind, here are seven tips for apartment owners hoping to regain control of their insurance costs:
- Work with your insurance team – ideally, advisors with an intimate understanding of the complexities of the multifamily market – to begin the renewal process early. Every commercial property insurer is seeing higher submission volumes. Timely, complete and quality submissions are vital to ensure your application is reviewed by underwriters.
- As best you can, decide in advance of submission whether you might need to adjust your business’ retentions or limits to help manage costs.
- Gather as much data as possible regarding your existing risk management controls. Be sure to work with your team to present loss-control measures you have in place.
- Conduct a thorough inspection of both your property and the surrounding area for specific risk management concerns. Implement additional mitigation measures as needed.
- Analyze your organization’s natural disaster exposures. If your property is located in an area prone to a specific catastrophe, implement mitigation and response measures (e.g., install storm shutters on windows to protect against hurricane damage or utilize fire-resistant roofing materials to protect against wildfire damage) to protect your property as much as possible.
- Develop a documented business continuity plan (BCP) that will help your organization remain operational and minimize damages in the event of an interruption. Test this BCP regularly with various possible scenarios. Make updates when necessary.
- Address insurance carrier recommendations. Insurers will be looking at your loss control initiatives closely. Taking the appropriate steps to reduce your risks whenever possible can make your business more attractive to underwriters.
The Mahoney Group is one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.