The commercial property insurance market has been a tough one over the past several years. Unfortunately, 2023 won’t be any better. The property insurance market will certainly see increased rates in 2023, so it’s critical to start renewals well before deadlines. At least 90 days + prior to expiration.
Most seasoned industry brokers and underwriters agree that 2023 will likely be the firmest market they have ever experienced, despite most buyers feeling that they didn’t think things could get much worse after the last few years.
Almost all carriers have had less reinsurance capacity and options available to them to offset rate and retention increases, so without a doubt, buyers need to be prepared for carriers to pass the bulk of these costs onto them.
It’s more important now than ever to start property insurance renewals as far out as possible because it’s likely that renewal terms will continue to come down to the wire, despite everyone’s best efforts. As insurance programs see changes and increased costs, policyholders will need to see various deductible and limit options, and each option will take time to iron out with underwriters.
This post definitely has a pessimistic tune which is not how I like to sound. I’m simply passing along what I’ve seen in the market and what I have heard from industry leaders.
The positive in all of this is knowing that this is the state of the commercial property insurance market which we cannot control. What you can control is being prepared ahead of time for your policy renewals, so that you can secure the best possible terms for your organization.
Several months ago, a client of mine lost their commercial building to a fire. A total loss. It was a really unfortunate situation.
There’s been a lot going on since then, but I’ll fast forward to the claims process today.
In speaking with the claims adjustor, my client was told he should feel really good about his policy coverage. That you “should be thankful that your broker put together a nice comprehensive policy for you” with all the bells and whistles.
My client called me to share the news of this conversation. In a time of difficulty, it was refreshing to hear such a strong statement from the carrier side.
As their agent/broker, this made me happy to hear. It’s NEVER fun when you get a call from a client sharing they sustained a property insurance loss. These are really technical policies with so many coverage types, endorsements, and exclusions that vary from carrier to carrier. In fact, I would argue that commercial property insurance is the most complicated line of insurance to deal with after sustaining a loss.
The thing is, you can’t just get a “Cadillac” policy for just any old subject of insurance. Whether it’s for Commercial Property, Liability, Workers Compensation, or any other form of insurance, the subject of insurance needs to be well maintained in order to get quality coverage from an insurance policy.
It’s like having good credit. When you do, you get better interest rates, better loans, better terms. You have banks lining up wanting to lend you money.
The same goes for insurance policies. You see, my insured’s commercial building was totally renovated within the past 10 years. Roof, plumbing, electrical, and heat were totally updated to modern standards. Carrier underwriters LOVE to see this. This allowed me as their agent/broker to build a quality policy that ultimately came through in a big way during my insured’s greatest time of need.
This doesn’t just apply to commercial property insurance either. Take Workers Compensation insurance for example. Your company has a sound safety program/culture with favorable claims/loss history. As a business owner, you conduct employee screenings, background checks, physicals, etc., etc. When all these details align, you will have carriers fighting to insure your business knowing you take the necessary measures to try to prevent claims from happening in the first place.
Or let’s talk about Commercial General Liability. You can get better terms and pricing if you have proper contracts in place with vendors and other interested parties. Sound quality assurance procedures for your products or operations. These things and so many more will help not only mitigate claims, but it’ll help swoon underwriters like you’re a contestant on The Bachelor (ABC).
The list goes on with all types of business insurance policies.
It’s then up to your insurance agent or broker to put together a quality policy to protect your business. This too is extremely important because, like all industries or professions, there are a lot of good insurance professionals out there but bad ones too.
At the end of the day, you have to give in order to receive it. You make sound business decisions and have proactive risk management procedures in place, you can get exceptional insurance coverage at a reasonable price. But if you don’t really care about the important details and don’t put much TLC into what you do, don’t expect the world from your insurance policy. You don’t give a crap? Well, you will only get crap in return.
As for my client who lost their building, the carrier has already paid out $180,000 of almost $500,000 in losses. They have superior coverage because they have a superior broker of course ;). But more importantly, superior coverage because they had a superior building which was well maintained with love. In return, this allowed me to build the “Cadillac” insurance policy that will ultimately keep their asset protected and give rest at night knowing they will be made whole again by the carrier in response to this unfortunate loss.
A lot of businesses are shut down right now and suddenly there are many individuals who find themselves out of work. Premises’ that are typically bustling with business and commerce are at a standstill sitting vacant as we wait for this Coronavirus pandemic to pass.
I’m hoping this doesn’t become a trend but just this morning alone, I had two different retail clients call in to report claims burglary and theft overnight with the doors busted open as a point of entry. Luckily due to monitored alarm and surveillance cameras, the burglars didn’t seem to get away with much based on early indications.
This serves as a reminder to be vigilant with your business premises and your neighbors in the surrounding areas.
Here is a Burglary Prevention Checklist from The Hanover Insurance Group to help get your brain thinking about measures you can take to help prevent burglary and theft at your place of business. We have enough to deal with right now, so let’s try to eliminate additional perils like this if at all possible.
If you own an apartment building, you know it’s a valuable asset that you want to make sure to protect to ensure it continues to bring monthly income into your pocket in the form of rental income. Take care of your baby!
Philadelphia Insurance Companies has identified three leading causes of residential fires: electrical issues, smoking, and cooking. Additional hazards include laundry dryers, barbeques, and flammable liquids. To address these causes, Philadelphia recommends the following tips and resources to help you reduce the chances of a fire at your apartment building:
Electrical Fire Safety
- Do not overload your system by using “daisy chains” of power strips or extension cords
- Have the entire electrical system inspected by a qualified electrician prior to building purchase or occupancy
- Have your electrical system inspected at least every 10 years by a qualified electrician
- Have an infrared scan of your electrical system with a thermographic camera every three to seven years to identify hot spots
- Tighten or replace components where hot spots exist to help prevent electrical fires and for possible savings in electrical consumption
- Visually inspect key electrical components, like breakers and switches, on an ongoing basis, making sure they are clean, dry, and tight
- If your apartment building has aluminum wiring or Federal Pacific Stab-Lok breakers, these are known fire hazards; contact your insurance broker or carrier for Risk Management Services to help
Smoking Fire Safety
- Make your apartment building smoke-free
- If you cannot have a non-smoking apartment building, create a safe smoking area at least 20 feet away from the building with a non-combustible, non-tipping receptacle for ash and butts
Cooking Fire Safety
- Implement cooking fire preventative devices, such as stovetops that sense unattended cooking or limiting the temperature of the cooking surface
- Implement Auto-Out fire reactive devices that expel an extinguishing agent in the event of a fire
Laundry Dryer Fire Safety
- Verify that dryer lint traps are in good condition and being cleaned often to prevent buildup
- Ducting from the dryers should be smooth aluminum, and should also be on a cleaning schedule
Flammable Liquid Fire Safety
- Do not store more flammable liquids or aerosols than necessary on a property. Discard all not being used and store the remainder in a UL listed flammable liquids cabinet
Barbecue Fire Safety
- Consider a policy of “no personal” barbecues on site. Provide a community barbecue located away from any building
- Do not allow any charcoal barbecues to be used onsite
- If personal barbecues are allowed, they should be used a minimum of 10 feet from any structure and not allowed on any combustible deck
Finally, make sure smoke detectors are present and operational. In residential fires resulting in deaths, 57% of the time a smoke alarm was not present or was not operational, according to the NFPA. Ultimately, the goal is to prevent fires, which requires a joint effort by apartment building owners, apartment building managers, and residents. A reasonable investment of time and resources by all three parties can help keep people safe and protect real estate investments. For more information, watch the four-minute video above from Philadelphia Insurance Company. And contact me anytime you have questions about protecting your apartment building. This is an ever-valuable asset you want to keep in good standing.
Credit: Philadelphia Insurance Companies
Effective 8/9, I finalized insurance for this Condo Homeowners Association in Harbor City. This is an 18-unit, 25,850 total square feet dual building property. Coverage’s include Commercial Property insurance for the structures, General Liability, and Director’s & Officer’s Liability to help protect the association board. The expiring policy didn’t include the D&O. I was able to add this coverage and still save premium dollars compared to the renewal terms the association received from the incumbent broker.
You never know when disaster will strike. Meet three survivors from three recent natural disasters: Hurricane Sandy; the Moore, Oklahoma tornado; and the Poinsettia Wildfire outside of San Diego. Watch their stories and then log on to www.ready.gov/prepare for more information on what you can do to prepare you and your family or your business. Be Smart. Take Part. Prepare.
I spent some time this Saturday morning working up some insurance quotes and options for a new men’s clothing retail store opening this Fall in Laguna Beach (CA). We’re looking into property, general liability, and workers’ compensation insurance coverage for the store.
Property exposures are limited, but if a fire should occur, the clothing provides a combustible fire load and is highly susceptible to water and smoke damage. Theft may be a concern if any of the items sold have high value. Appropriate security measures should be in place.
Crime exposures are from Employee Dishonesty and Theft of Money and Securities either from holdup or safe burglary. Employee dishonesty is controlled through inventory monitoring, control of the cash register, disciplined controls and division of duties. Theft prevention requires controls of monies kept in the cash drawers and regular bank drops.
Premises liability is always a concern in a retail exposure where the public comes to the premises. Floor covering must be in good condition with no frayed or worn spots on carpet and no cracks or holes in flooring. Sufficient exits must be provided and be well-marked, with backup systems in case of power failure. Dressing rooms must be well maintained and privacy carefully guarded. Shoplifting procedures must be fully understood and utilized by all employees.
Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slip and fall. If the business is open after dark, adequate lighting and appropriate security for the area must be present.
Products liability for this type of operation is normally low. Direct importing of clothes and tailoring can add to the exposure.
Workers compensation exposure is from lifting, which can cause back injury, hernia, sprain, and strain. What kind of training do employees receive, and what types of material lifting or conveying devices are used? If tailoring services are offered, injuries due to sewing and cutting injuries are possible.
Minimum recommended coverage:
Business Personal Property, Business Income, Employee Dishonesty, Money and Securities, Accounts Receivable, Computers, General Liability, Employee Benefits, Umbrella, Hired and Nonownership Auto, Workers Compensation. Many of these coverage’s can be included within a single Businessowners insurance policy.
Other coverages to consider:
Building, Leasehold Interest, Real Property Legal Liability, Forgery, Computer Fraud, Bailees Customers, Fine Arts, Employment Related Practices, Business Auto Liability and Physical Damage.
Have a retail clothing store and need some guidance on your insurance? You can contact me anytime to discuss. I’d be happy to help you out.
Source: Rough Notes, Inc
“Over 50,000 square feet with 9 bedrooms, 25 bathrooms, outdoor clay tennis court to French Open Specifications, indoor tennis court to US Open Specifications, complete with neoclassical details, stunning murals & capable of conversion to a 350 attendee ballroom, orchestra & full catering facilities; Indoor & Outdoor swimming pools ; Staggering underground Moroccan-style baths; unimaginable panoramic views encompassing the beaches, West Side, the Hollywood Hills, downtown Los Angeles & the San Gabriel Mountains; 24-hr guarded/gated estate community & multiple property surveillance cameras & breach sensors; Tranquil & exceptionally aromatic manicured grounds that include jetliner views, aligned marble fountains, a bocce court, rose garden, a wide selection of herbs, wild flowers & orchards that produce 24 varieties of fruit & nut trees.”
This is a pretty cool video of a helicopter maneuvering in someone’s backyard to scoop up water from a pool to help fight a wildfire.
Planes and helicopters are critical tools in managing wildfires, particularly in California where we face wildfires annually. Although aircraft are often used to fight wildfires, aircraft alone cannot put them out. Firefighters rely on planes and helicopters to:
- Deliver equipment and supplies.
- Deploy smokejumpers and rappellers to a fire.
- Transport firefighters.
- Provide reconnaissance of new fires, fire locations, and fire behavior.
- Drop fire-retardant or water to slow down a fire so firefighters can contain it.
- Ignite prescribed fires
Thanks to all our fire service personnel who help protect us when we need it. We are grateful to have them.
Source: US Fire Service
We don’t see thunder and lightning like this in Southern California! Watch this train get struck by lightning at the 1:20 mark in the video:
When a lightning storm is on the verge of striking your area, you need to take cover to get out of harm’s way. Here are some tips from a former post on Lightning Safety Considerations