Your borrowers’ exposures to loss are not static... they are continually evolving.
Have you considered:The scope and applicability of Terrorism coverage?
The markets ever changing response towards coverage for Terrorism? Prior the events of September 11, 2001 (9/11), most policies were silent regarding coverage for loss, damage or liabilities due to Terrorism. Since such acts were not excluded, they were covered. However, post 9/11, carriers carved out such coverage through Terrorism Exclusions. Coverage could be bought back for an additional premium. However, some markets, are returning to the pre 9/11 poilcy structure. Is Terrorism covered by your borrower’s program? If so, what is the scope of such coverage?Catastrophic weather-related perils and their impact on your collateral?
Your coastal customers may not be protected against catastrophic weather related damage? Wind, Flood, Storm Surge? Are you aware that many carriers are denying the windstorm damage resulting from -such catastrophic weather related perils? Retentions for weather-related perils are rising as well. Who is paying your claim?Sufficient of limits and the impact of coinsurance provisions and the impact to your loss recovery?
Coinsurance Issues? LIMITS ARE NOT ENOUGH. Are you aware that even though the limit insured may exceed the value of your collateral, this may not be fully collectible if the borrower has not purchased limits that meet the coinsurance requirements in their property policy?Terms and Conditions regarding Valuation provisions?
Restrictions to Replacement Cost Valuation? Older buildings may not meet all current zoning regulations and codes. Replacement Cost coverage does not include coverage for extra expenses involved in meeting more current codes and regulations. Does your borrower have sufficient Law & Ordinance coverage?AM Best Ratings of carriers – Is your borrower’s insurance carrier financially sound?
Post 9/11 and the economic downturn that resulted, we saw many insurance carriers fail. While the insurance market has stabilized, constant monitoring is still required.