The current state of the commercial insurance market poses several pain points for affordable multifamily housing owners and operators, including rising premiums and decreasing coverage.
The reasons for these hard market conditions are many, ranging from an uptick in catastrophic weather events, building material costs, inflation, and labor shortages to huge liability payouts, cybercrime, and reinsurance challenges.
Many of the factors impacting the current hard market cycle are pure economics and well beyond the control of affordable housing owners and operators, according to Jeffrey Weslow, assistant director of business development and strategic solutions for HAI Group, a member-owned insurance carrier dedicated to serving the public and affordable housing communities.
Fortunately, owners and operators don't have to sit back and wait for the market to soften on its own.
"There are several proactive steps affordable housing owners and operators can take to alleviate some of the hard market pressures they face," the insurance veteran explains.
Weslow suggests five mitigation strategies:
- Keep Comprehensive Records. Weslow stresses the need to document everything in your portfolio. “When was the last maintenance overhaul? How about the roof? The more you can share with your agent or prospective agent, the better,” Weslow says. “If they don’t know, they assume the worst.”
- Shop Around. Ask yourself, “Could we be doing better elsewhere?” It’s an imperative question in a hard market.
- Assess Your Risk Tolerance. The more risk you’re willing to assume, the lower your premium expense. Are you willing to take on more deductibles? “Self-insurance may be practical up to a certain level. Ultimately, it’s about the relationship you create with your carrier,” Weslow notes.
- Educate Yourself. Leave nothing to chance in understanding multifamily affordable housing, especially how it intersects with federal housing agencies. There are rules and regulations that can impact the insurance decision-making process.
- Work with an Expert. Trusting a general carrier that serves a wide variety of commercial customers, such as supermarkets and gas stations, may not serve the best interests of owners working in a world of low-income housing tax credits, syndicators, and financing stacks.
“Is the carrier mission driven to serve the multifamily affordable housing community? Does their book of business demonstrate it? What’s their AM Best rating? How does their Net Promoter Score look? What’s their retention rate?” Weslow asks.
Learn more about how to mitigate affordable multifamily housing property risk and insurance cost.