Property ownership strategies amid insurance changes

The "co-insurance clause" in commercial property policies isn't just fine print—it's a financial landmine most business owners discover too late. I met with a restaurant owner last week who was stunned to learn his policy would only pay 60% of his claim despite having "full coverage." The culprit? A co-insurance clause requiring him to insure at 80% of property value, which he hadn't reviewed in years as property values surged. This isn't uncommon. In our last 100 policy reviews, 72% of business owners were underinsured relative to their co-insurance requirements—potentially leaving them with tens of thousands in unexpected out-of-pocket costs after a loss. Here's what smart business owners do differently: 1. Schedule annual property valuation updates with your broker—real estate values have increased 28% on average since 2020, but most policies haven't kept pace. 2. Request an "agreed value" endorsement that waives the co-insurance requirement (often available for a small premium increase). 3. Document building improvements and equipment upgrades throughout the year to ensure they're reflected in your coverage limits. The most powerful insurance tool isn't adding more coverage—it's understanding what you already have. When was the last time you checked your property valuation against your co-insurance clause requirements?

A growing share of real estate risk is becoming uninsurable. Not hypothetical. Not long-term. Now. Disaster risk is accelerating faster than markets can adapt. The insurance industry is flashing a warning signal that property owners and developers can't afford to ignore. Here's the brutal reality: Protection gaps are widening. Re/insurance markets are being tested to their limits. And the fundamental question keeping underwriters up at night is: How do we preserve insurability when risk is growing exponentially? This report from Geneva Association, authored by Hélène Schernberg, analyses 14 public-private insurance partnerships (PPIPs) globally, the safety nets designed to keep markets stable when catastrophe strikes. The findings? They're buckling under the weight of rising losses. What this means for real estate: → Risk-sharing alone is no longer enough in high-exposure regions → Properties in certain areas may hit the point of "uninsurable risk" → Asset values will increasingly depend on demonstrable resilience measures → The old playbook of "insure and forget" is dead The new deal real estate must accept: Government-backed insurance schemes aren't going away, but they but they're being redesigned around a non-negotiable principle: risk reduction, not risk subsidy. This means: ✓ Premiums will reflect actual risk ✓ Buildings that invest in resilience will be rewarded; those that don't will pay more, or go uninsured ✓ Risk-informed planning and construction standards won't be optional ✓ Resilient infrastructure becomes a competitive advantage For property owners, developers, and investors: Your building's insurability is now a critical asset valuation factor. Properties designed for yesterday's climate with yesterday's standards are depreciating assets in tomorrow's risk landscape. The choice is stark: proactively invest in resilience now, or reactively absorb escalating premiums, coverage restrictions, and ultimately, uninsurable assets. The transition from reaction to proactivity isn't optional. No institution can solve this alone - not governments, not insurers, not property owners. But aligning around one common goal, building resilient real estate, is the only path forward. The time to act is now, before rising risk becomes uninsurable risk and your property portfolio becomes unfinanceable. Is your real estate strategy accounting for the insurability crisis? 🔗 Link to full report in comments ♻️ Repost this to help your network 👉 Follow Dr Sophie Taysom for more

Rising Risks, Bigger Opportunities?! . . Climate change is reshaping the landscape of real estate in ways we can no longer ignore. Natural disasters are happening more often and with greater intensity, driving up home insurance costs across the board. For property owners, this means one thing: shrinking Net Operating Income (NOI). . When NOI drops, property valuations follow. And for many, this spells financial trouble. But for smart investors, it signals something else entirely: opportunity. . Here’s why: when properties lose value due to rising insurance costs, they often hit the market at a discount. This creates a chance to: . 1. Acquire properties below market value. Sellers facing these financial pressures are often motivated to offload their assets. 2. Add resilience and value. Floodproofing, fire-resistant materials, and energy-efficient upgrades not only protect properties but attract higher-paying tenants and reduce long-term expenses. 3. Invest in climate-safe markets. As people and businesses relocate to areas less vulnerable to climate risks, these markets offer tremendous growth potential for early investors. . The reality is clear: climate change is disrupting the status quo. But with disruption comes opportunity—for those who are prepared to adapt. The question is, will you pivot and profit, or let these changes leave you behind? . The choice is yours. . . . #realestateinvesting #ClimateChange #realestatestrategies #SustainableInvesting

The latest report from the Urban Land Institute and Heitman, "Insurance on the Rise: Climate Risk and Real Estate Investment Decisions", highlights the growing challenges faced by commercial real estate (CRE) due to rising insurance costs driven by climate risks. Key takeaways for #propertymanagement are: 📈 Beware Rising Costs: Insurance premiums are increasing due to inflation, more frequent natural disasters, and regulatory constraints. 💰 Value Will Be Impacted: Higher insurance costs are reducing net operating incomes and affecting property valuations and transactions. 🏹 Strategic Response Required: CRE owners are adopting strategies like higher deductibles, self-insurance, and layered coverage to manage costs. 💲 Investment Considerations: Investors are focusing on geographic diversity, asset resilience, and risk reduction strategies to attract affordable insurance. 💡 Emerging Trends: Watch for insurance-driven migration, the growing insurance protection gap, and the potential for government-backed insurance programs. As a means of mitigating elements of this risk it is vital we stay proactive in managing insurance costs and consider innovative solutions to maintain profitability and resilience in the portfolios we manage. Our Property Management #sustainability teams can assist in identifying #resilience #vulnerability and #adaptation options for any asset under management by leveraging our partnerships with Deepki and Climate X #RealEstate #Insurance #ClimateRisk #CRE #Investment #RiskManagement #UrbanLandInstitute https://lnkd.in/ery4SnDw

Everyone has felt the sting of valuation increases over the past few years, right? As the Property insurance market started to harden, costs of construction increased & inflationary pressures increased, insurance carriers started putting more emphasis on ITV [insurance to value] calculations. Your property premium is generally a function of your TIV [total insured values] * rate / 100. SO - what can you do when your carrier wants to drastically increase values at renewal? 👉 Quick example: underwriter is insisting values need to be raised 30% across the portfolio and they're taking a 15% rate increase this year. Assuming there are no competitive alternatives to use as leverage, what are your potential options? Here are some common considerations: 👉 If you agree your property valuations are grossly low, decide to increase them by the 30%. Negotiate the rate increase down as trade off. 👉 Negotiate a 'stair stepping' approach. i.e. Agree to increase the values by 10% a year over the next 3 years & accept the rate increase. 👉 Agree to a stair stepped valuation increase IF the carrier will offset part of it with the rate increase. As an example, you could increase values by 17.5% the first year, but with half the rate offset. While you still have a 25% increase overall, only 7.5% is rate. 👉 Keep lower values and accept a Margin Clause or other reduced coverage options. This can impact the amount you're paid in the event of a loss, as well as future placement options. It is imperative that your broker explain the potential implications of any reduced coverage option with you & you are comfortable accepting the risk. The first & third options potentially allow you to go out to market with a lower expiring rate per $100 in values next year. This is a strategic longer-term play as it positions you to negotiate consistently lower rates in future renewals as valuations level off. Every situation is different. Your broker should be discussing options with you & helping decide what makes the most sense given your risk appetite and business needs. *Note: These options assume you prefer a standard type of insurance placement. Depending on the situation, alternative risk financing options like captives & fronting arrangements may also be a solution

What should CRE Owners do if their Community has a high FEMA NRI Score? RiskFootprint™ is the only hazard/climate assessment report that includes all of the FEMA National Risk Index (NRI) scores, including the NRI aggregate risk score. The National Risk Index is a dataset and online tool designed and built by FEMA to help illustrate the U.S. communities most at risk for 18 natural hazards. The Risk Index leverages available source data for natural hazard and community risk factors to develop a baseline relative risk measurement for each U.S. County and Census tract, to help users better understand the natural hazard risk of their communities. https://lnkd.in/eKFU84-J. The NRI aggregate risk is calculated by multiplying the property’s Expected Annual Loss (EAL) times the Social Vulnerability (SV) of the Community in which the property is located, and dividing that by FEMA’s Community Resilience Score (CR). If a commercial real estate company owns a building in an area with a high FEMA National Risk Index Score, there are several steps the owner can take to manage and mitigate the risks: 1. Conduct a Detailed Risk Assessment: Evaluate the specific risks identified by the FEMA National Risk Index, such as flooding, hurricanes, or earthquakes. This will help in understanding the potential impact on the property. 2. Develop a Mitigation Plan: Create a comprehensive plan to address the identified risks. This could include structural improvements, such as reinforcing the building, installing flood barriers, or upgrading infrastructure to withstand natural disasters. 3. Invest in Resilience: Consider investing in resilience measures, such as backup power systems, water management systems, and emergency response plans. These investments can help minimize downtime and damage during and after a disaster. 4. Review Insurance Coverage: Ensure that the property has adequate insurance coverage for the identified risks. This may involve updating existing policies or purchasing additional coverage to protect against specific hazards. 5. Engage with Local Authorities: Collaborate with local government and emergency management agencies to stay informed about risk mitigation programs and resources available for property owners. 6. Educate Tenants and Staff: Provide training and resources to tenants and staff on emergency preparedness and response. This can help ensure everyone's safety and minimize disruptions during a disaster. 7. Monitor and Update Plans Regularly: Continuously monitor the risk landscape and update mitigation plans as needed. This ensures that the property remains protected against evolving threats. By taking these proactive steps, the owner can better manage the risks associated with a high FEMA National Risk Index Score and enhance the property's resilience. For further information contact us at customerservice@riskfootprint.com. #FEMA #NationalRiskIndex #NRI #CommunityResilience #resilience #riskassessment #riskmanagement #riskfootprint