WeaveReport South Florida Multifamily

A CONVERSATION ON INSURANCE WITH BRYAN SWICICKI AT BCI INSURANCE. Cushman & Wakefield sat down with Bryan Swicicki to discuss the current South Florida insurance market. Bryan has placed more than $8 Billion in commercial property insurance concentrated in the Habitational and Retail sectors. He has extensive experience negotiating insurance requirements with bank, agency CMBS and life company financing.

INSURANCE IS OBVIOUSLY AN IMPORTANT FACTOR IN MANY REAL ESTATE TRANSACTIONS. HOW WOULD YOU DESCRIBE THE CURRENT INSURANCE MARKET AND WHAT CHANGES DO YOU SEE ON THE HORIZON? Property insurance costs and even availability for real estate investors have been under considerable pressure for the last 12-18 months. Nationally, average rate increases for both the Property and Liability sectors have ranged between 10% and 40%. Unfortunately, in Florida, we are seeing this and worse. In the past year, we have seen a significant reduction in capacity. Increased construction costs and changes to climate models are driving costs even higher locally. Investors can expect increased insurance costs and reduction in coverage options. Increases on renewals will be commonplace. New purchases will typically trade with higher insurance costs than the seller previously experienced. One underwriter recently described the situation as, “turning all the dials.” As companies increase rates, they are also raising the amount of coverage required and increasing deductibles. It has become the norm for property insurers to only offer 10 or 15% wind deductibles while lenders typically require 5%. We are seeing the need for wind deductible buy down policies to satisfy lender requirements. The most important factor in obtaining a favorable insurance program is to work with a local broker with specific experience in South Florida habitational insurance. The market is fluid and a specialist will know how to best present your property to underwriters and which carriers to approach. If you control several properties, underwriters may give better terms on the entire portfolio when the program is properly designed and implemented. WHAT DO THESE TRENDS MEAN TO REAL ESTATE INVESTORS? HOW DOES AN INVESTOR MITIGATE COSTS AND PROCURE THE MOST SUITABLE COVERAGE?

CAN YOU SHARE AN EXAMPLE OF A STRATEGY THAT HAS HELPED WITH INSURANCE COSTS? Out of necessity or the goal of obtaining better coverage options, we have found the “layering” of property insurance limits to be beneficial. With this strategy, we can arrange for several carriers to share the risk instead of one carrier insuring an entire building or portfolio. While this approach has historically been used for larger values, we are now seeing it done on deals of $5 million and under. The importance of having a seasoned insurance specialist who can thoroughly review and help you understand your insurance policies cannot be stressed enough. Knowing the answers to a few important questions such as: “do I have more coverage than I require?” and “are my properties rated correctly?” can make all the difference in positively influencing your insurance portfolio. Further, accurate details about your properties including building attributes such as construction type, year built, and distance to the coast are making a greater difference than before in the cost of insurance. In addition, factors such as the age of a roof are critical; replacing roofs over 10-15 years old may make a substantial difference in premiums. Lastly, be sure to investigate your insurance options at every renewal to ensure you are optimizing your portfolio. For more information or to discuss your specific situation contact Bryan Swicicki, CIC 772-359-5490 info@bci-ins.com WHAT CAN I DO TO INFLUENCE MY INSURANCE PORTFOLIO?

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