Real Estate Portfolio Risk Management, More than just an insurance policy

Business Insurance – Your Weekly Cup of  Joe –  By Joe Buick

Joe Buick - Vice President

Joe Buick – Vice President

Kapnick and its Insurance Carriers have an appetite for Real Estate portfolios. We work daily with owners of these types of properties. Our clients have property schedules ranging from $100,000 to $100,000,000 (and higher). Several of our sales and service teams exclusively work to insure our clients’ portfolios. Often we have little time to react to our clients new investments. We at times need to add apartment complexes in an hour or two, depending on our client’s needs. The deep and long term relationships that we have with our stable of insurance carriers enables us to turn these around to meet expectations. Special items like premium allocations, loss of rent calculations and detailed contract reviews are some of the additional services that we provide to our clients in addition to placing the insurance contracts. Customized claim information can also be provided for our clients to help them understand that areas of improvement may exist. Once areas for improvement are identified, our Risk Service Department will work with clients to craft safety programs that are needed for Real Estate Holding Companies. These customized safety and loss control programs are critical for business owners that have so much exposure to potential third party claims. These additional services are offered to our clients to help reduce their administrative burden and to ultimately lesson their overall cost of risk.For Real Estate Portfolio clients a property loss can quickly dip into profits if not handled promptly. Another service that we provide (highlighted In an earlier blog) is the RED ALERT Priority Response Program available through BELFOR Property Restoration. Kapnick clients are automatically enrolled in this comprehensive program, as a no-charge value added service. The advantage for a business when disaster – natural or catastrophic – strikes, is that through our (and Belfor’s) emergency response hotline, clients receive priority response status from Belfor’s property restoration professionals. This can be a real help for property managers.

Has your agent discussed specialty Real Estate insurance services? Ask Joe a question about Real Estate specialty services in the comment box below.

2 replies
  1. charles springer
    charles springer says:

    I have a portfolio of real estate notes in the northwest and Alaska. The risk I perceive on the insurance side is a lapse of coverage by a borrower or a catastrophic earthquake.

    Do you have any recommendations for such an exposure?

    Thank you


    • Kapnick Insurance Group
      Kapnick Insurance Group says:

      Hi Chuck,

      To avoid a lapse in coverage you as the lender should require that Mortgagee provisions in the insurance policy match the standard clause of ISO forms or the Lender’s Loss Payable clause per section D of ISO form CP 12 18 (06-07). This will ensure that you as the lender/mortgagee is given notice of policy cancellation by the insurer – 10 days’ notice of cancellation for nonpayment of premium and 30 days’ notice when cancellation is for other reasons; and the lender/mortgagee is to be given 10 days’ notice on nonrenewal. Since only a policy can obligate an insurer to provide notice of cancellation you should get a copy of the actual policy or at a minimum a copy of the Mortgagee provision or lenders loss payable clause in the policy naming you as the lender/mortgagee.
      If the borrower does not maintain coverage on the property, most promissory notes or security instruments give the investor/lender the ability to advance funds to force place insurance coverage. This type of coverage is referred to as “forced place coverage” in the industry and requires advance planning for you to obtain. You should work with an insurance broker that specializes in forced place insurance. Track your borrower’s policies carefully and be prepared to force place if needed.
      To protect your investment or insurable interest in the real estate from the peril of earthquake you should require the borrowers to carry earthquake coverage if the real estate is located in a high-risk area for earthquakes. The Northwest and Alaska both have high earthquake hazard areas based on fault lines. As an alternative you could also look into purchasing earthquake coverage at full limits or a smaller sublimit, say 25% of the replacement cost value from your insurance broker.

      Micah Teets
      Direct: 248.327.0455 or ext. 1204

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