Real Estate Tips and Guide: Four Strategies to Address Catastrophe Property and Liability Exposures

Many challenges are faced by commercial real estate owners in addressing issues on Catastrophe Property and Liability Exposure. These challenges include, but are not limited to, the following:

• Inadequacy of modelling tools in estimating potential losses from such catastrophes as hurricanes and earthquakes.
• Inherent-Low Frequency Rate of catastrophic event will also mean that the standard actuarial techniques are not as effective.
• Significant amount of due diligence combined with real estate risk management expertise to make sure that all policies are aligned with contractual exposures.

Because of these challenges, commercial real estate owners are facing the need to partner with risk management experts that have a thorough understanding of the industry's unique challenges.       

            Here are some strategies provided by the National Real Estate Investor to help commercial real estate owners address catastrophe property and liability exposures.

            Set Up Proper Limits Based on Catastrophe Modelling

            Catastrophe models are able to input accurate and detailed physical characteristics of individual properties into the modeling software. To effectively utilize catastrophe models as basis of setting up proper limits will require a combination of actuarial analysis, information gathering and negotiation.

            Obtain Secondary Property Feature to Improve Modeled Results

            Companies can model results to better understand locations that are exposed to natural catastrophe risks driving the loss estimate with the help of the right risk management partner. Companies can be sure that they are accurately reflected in the loss output with the goal of directly reducing premium when they obtained detailed data regarding the location.

            Eliminate Subcontractors Warranty and Limitations

            Warranty language exclusions are often included in the general liability policy, and can create significant financial exposure for companies. Negotiations for the removal of the warranty language exclusions from the general liability policy can fill in a potential costly gap.  

              Alignment of Policy Coverage with Contractual Exposures

               Review contracts and coverages that are being transferred to make sure that the content of relevant policies supports the agreed contractual obligations of both the company that will transfer the liability and the company that will assume the liability.