Maximizing commercial property insurance

In a struggling insurance market, make sure your business has strong risk management procedures, prepare for early policy renewal and anticipate potential questions.

New York – Eric Jesse, partner in Lowenstein Sandler's Insurance Reimbursement Group, discusses the current state of the property insurance market. He offered advice on how companies could make their commercial properties a more attractive risk to insurers.

Eric Jesse: Commercial property insurance is core coverage for businesses. It protects your business' buildings and structures from loss or damage, along with property, equipment and other personal property inside those buildings. Property insurance typically covers loss of business income lost as a result of a covered event. This coverage was in the spotlight during the COVID-19 pandemic when businesses were forced to close or operate with restrictions.

So what is happening in the market? Natural disasters of billions of dollars, problems in the supply chain and inflation problems are some of the events that contribute to significant losses and insurance payments, and - relevant for you - to the hardening of the insurance market. That means higher premiums, but it also means insurers are increasing deductibles, offering lower limits, adding sub-spices, and including more restrictive coverage allowances and broader exclusions.

Even so, there are some things businesses can do to navigate this difficult market, to minimize the impact of these widespread events, and ultimately to be a more attractive risk.

First, work with a knowledgeable broker and coverage advisor who will know the ins and outs of the market and advocate for you. Also, just be proactive. Don't wait until a few weeks or a month before your policy is due to renew. The renewal process takes time, and getting started can give you a better chance of negotiating better terms.

Second, make sure your business has strong risk management procedures. For example, if your business subcontracts, make sure these subcontractors have their own insurance and that your company is named as an additional insured. Insurers will be more comfortable insuring you if there are other potential sources of recovery in the event of a loss that spread their risk exposure.

Third, be prepared for a more intensive underwriting process and anticipate the questions that will come your way. For example, does your business have an up-to-date values ​​statement so that insurers can understand the size of the risk they are taking on?

Business interruption aside, what does your supply chain look like? Do you have a list of suppliers you rely on to run your business?

Preparing these materials in advance will allow for a smoother underwriting process and will also show potential underwriters that your company has its act together.

The content of this article is intended to provide a general guide to the subject. Expert advice should be sought regarding your specific circumstances.