Commercial Property Challenges
Many underwriters require more extensive scrutiny for larger-valued commercial properties, but the effort can be worth it to obtain more favorable pricing.
“The real-estate-owned marketplace is not new for insurance carriers, but the challenges are certainly exacerbated by current economic trends.”
Christopher Taylor, Zurich
Commercial properties with values less than $5 million can typically be rolled into the financial institution’s insurance program that covers residential mortgages. These programs provide reporting-form coverage that kicks in automatically for newly foreclosed properties. For carriers, commercial real estate represents a much more diverse and complex set of exposures. While some carriers provide reporting form policies for commercial properties, they charge very high rates to account for that uncertainty. By marketing the risk individually, a broker can often secure better rates from a carrier that undertakes a more extensive underwriting process. Though pricing has been stable to declining, for the market to be sustainable it will have to respond to rising loss costs as more vacant properties come into the real-estate market.
Copyright © 2012 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.
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