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SECTOR FOCUS: COMMERCIAL PROPERTY
Building trust IBA talked to experts in commercial property insurance to finds out why specializing in this space is a real no-brainer
WHO NEEDS COMMERCIAL PROPERTY INSURANCE? Restaurants and bars Medical centers and hospitals Office buildings Strip malls Factories and garages
COMMERCIAL PROPERTY insurance is required for any individual or organization that owns or operates commercial real estate. It’s a huge segment that includes everything from factories, restaurants, office buildings and strip malls to apartments and condominiums. Supported by strong economic results and impressive construction data, the commercial property sector is performing well and is primed for further expansion in the coming years. From an agent’s perspective, developing expertise in commercial property is a no-brainer. “There is strong growth in demand, as we continue to see a fairly robust economy in the US,” says Joe Zuk, commercial division president at Atlas General Insurance Services. “Construction and infrastructure rehabilitation and remodeling are the big drivers for the property demand. In terms of rates, I would call the market somewhat schizophrenic. In areas susceptible to catastrophic weather events or loss-driven areas, rates are firming. I would by no means call it a hard market – we are still seeing rate decreases in non-CAT areas, and earthquake rates have continued to flatten and trend downwards.” The extreme weather events of last year led to the highest-ever global insured losses from catastrophes in a single year. In addition to high-profile weather disasters like
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Hurricanes Harvey, Irma and Maria, carriers are also suffering from weather-related events such as hail and convective storms, which historically haven’t been big loss drivers for insurance companies. “Hail losses are becoming increasingly common and more severe, and the same is true with flood,” says Martha Bane, managing director of Gallagher’s property practice. “It is very difficult to predict where flood losses will occur, and in Houston, 40% of
Industrial parks Retail stores Apartments and condominiums
Necessary coverage Commercial property owners and operators face an array of standard property and liability risks, including fire, smoke, water, vandalism, leaks and slip-and-fall injuries.
“What has been really key in this market is developing a relationship between the carriers and your clients – it is extremely important they get to know each other” Martha Bane, Gallagher the losses occurred outside of a high-hazard flood zone. We’ve also seen an uptick in nonphysical damage coverage. Clients may not have suffered a physical damage loss, such as the flooding in Houston, but their business may not have been accessible to customers. As a result, coverages for ingress/ egress and civil authority have been increasingly important and more widely available.”
Owners might also face other exposures, depending on the type or location of their building and the nature of their business. These risks usually require customized endorsements or separate policies and could include coverage for construction or asbestos liability, earthquake, or flood damage. In some cases, it can take more than one policy to properly cover a commercial building.