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Downturn Ramps Up Insurance Issues

NEW YORK CITY-Insurance clients are paying more attention to containing costs and to the credit ratings of insurers, says a Marsh report.

By Paul Bubny | Updated on November 06, 2009

NEW YORK CITY-Insurer credit downgrades, rising costs for directors-and-officers liability insurance and increasing difficulty obtaining coverage for residential portfolios are just some of the challenges commercial property owners must face amid the downturn, says a new benchmark report from Marsh. However, the insurance broker and risk advisor says these issues co-exist with generally favorable pricing and readily available coverage.

“The economic environment and credit environment have had a major impact on real estate factors,” Jeffrey Alpaugh, a managing director of Marsh and leader of the firm’s global real estate practice, tells GlobeSt.com. “The debt markets are frozen and fewer buildings are trading, and a result, many real estate investors are focusing on asset management and decreasing costs within their portfolios.” The result, he says, is that many clients are restructuring their insurance programs to decrease the premium costs.

Among other things, real estate firms have amended terms of their insurance programs, increased retentions and reevaluated the amount of property catastrophe coverage they purchase, according to the Marsh report. “We’re seeing that the biggest total cost of risk for real estate firms is property insurance,” Alpaugh says. “When we look at their overall premium spend and divide it out, it could be 60% to 70%.”

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