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Let’s Talk About Multifamily Insurance.

Michael Payne

Michael Payne

Insuring Multifamily Projects | Asset Manager Specializing in Risk Management for Multifamily Professionals

4 articles

March 6, 2024

For years, premiums didn’t reflect the true cost of risk, leading to an unsustainable situation for carriers, especially in multifamily properties. While unintentional, it resulted in carriers losing money on multifamily policies year after year. Many didn’t survive. And as we learned in 2023, the only thing worse than expensive insurance is no insurance at all…

The current hard market isn’t some punitive measure by insurers; it’s a necessary correction. Carriers are leveraging data like never before to more accurately price risk. This includes factors like property history, local crime rates, and even resident demographics. While this might seem impersonal, it’s crucial for ensuring the long-term stability of the market.

We’re all hoping for a softening in 2024, but let’s be realistic: premiums won’t return to pre-hard market levels.

However, navigating this new landscape doesn’t have to mean accepting sky-high premiums passively. That’s where creative risk structuring comes in. By understanding the market and working with an experienced broker, you can explore options such as:

  • Higher retentions: This can lower your premium in exchange for assuming more upfront risk for smaller claims.
  • Loss prevention strategies: Implementing proactive measures like improved security systems or resident screening can demonstrate a lower risk profile to insurers.
  • Alternative risk financing: Exploring options like captive insurance or risk retention groups can offer greater control and potentially lower costs over the long term.

It’s a challenging time for everyone involved, but it’s important to remember that carriers are simply trying to operate sustainably. By working together with a knowledgeable broker and exploring creative risk structuring, property owners can still secure the best rate and coverage for their multifamily properties in this evolving market.

And do yourself a favor, do your due diligence before you select a broker to represent you. And once you make a decision, allow your broker to work the marketplace unencumbered. Resist the urge to engage multiple brokers. It will be counterproductive in your goal of obtaining the best offers from the marketplace.

#multifamily #insurance #hardmarket #datadriven #riskmanagement #creativeriskstructuring #multifamilyinvesting #winninginsurance

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