Current State of Industry

The current state of the economy has presented significant challenges for property owners and developers, particularly in regards to maintaining adequate insurance coverage for large apartment complexes. One of the primary concerns is the lack of capacity in the marketplace, as well as the rising cost of construction. In the event of a loss, such as damage from natural disasters like hurricanes, floods, wildfires, and earthquakes, the cost of rebuilding a large complex has surged due to the high demand for construction materials and labor, outpacing supply. This makes it crucial for insurance providers to ensure that there is adequate coverage in place to protect against these risks.

However, given the increasing frequency and severity of natural disasters, insurance providers must factor in the higher premiums required to offset the current and trending loss ratios they have been facing. As an owner or operator, this not only impacts your bottom line but also affects the return you provide to investors. Adding to the issue is the complexity of finding carriers that will insure the property at the values needed and with the coverages desired. With fewer carriers now vying for business, the competition has become incredibly selective, leading to capacity issues due to the loss ratios suffered by the carriers and the higher insured values now required.

To illustrate, consider an example from five years ago when a building was insured for $50mm with one carrier providing the full limit of coverage. Today, that same building needs to be insured for $75mm, requiring two or three carriers to provide the full limit. This not only creates a struggle to find and build the policy, but also in getting the carriers to align their insuring language to prevent gaps in coverage between the layers.

Overall, navigating insurance coverage for a large apartment complex in today's economy requires careful consideration and attention to detail. It is crucial to work closely with experienced insurance providers who can help navigate the complexities of the current marketplace and ensure that you have the proper coverage in place to protect your investment.