Captives Offer Options as Property Owners Face Hardening Market

Faced with a hardening insurance market, owners of multifamily housing properties are now working through renewals that bring sharp increases in rates, larger deductibles, and a decrease in capacity. When addressing all these factors, owners are starting to think more about self-insuring these risks. A captive insurance company can be an alternative risk financing vehicle that assists in funding for these liabilities.

Due to the current pandemic, we may see insurers adjusting their coverage forms. Communicable disease coverage may be eliminated, leaving property owners to cover losses caused by a disease spread from one person to another, either directly or through a vector, such as contaminated food.

Tenant prohibited access coverage may also be removed, leaving the property owners to bear loss of income should the tenants not be able to obtain access to the premises. This may be due to damage to the owners' premises or the surrounding area that restricts access to the premises.

A third coverage loss property owners may face is related to tenant relocation/move-back expense. In a tight rental market, it may be difficult to find comparable housing at the same rate the tenant was paying. Owners may be responsible for the difference between the two rent amounts. In addition to the potential increased rent expense, the property owner is financially responsible for the moving expenses of each tenant and their family.

Finally, insurers may be removing the protection and preservation of property from their coverage forms. Owners should make efforts to protect property that is in imminent danger; also, post-loss mitigation or remedial measures should take place to limit damage to the premises.

Establishing a captive insurance company can provide coverage for these exclusions in your commercial policy and help to create a more complete risk management program. In addition to these coverages, we will complete a risk analysis to determine other coverages that can provide more protection to your business. If you are interested in exploring adding a new profit center into your captive, ask about our Property Damage Loss Waiver and Security Deposit Waiver programs.