Commercial Property Insurance Through the Roof!

[Kim Hopkins]

Help! I know property insurance has gone up in certain locations such as Florida. But, our property Insurance has gone up across the board, across multiple states and in multiple asset classes including single tenant industrial, multi-tenant industrial, and retail. Our single tenant industrial properties have gone up over 200% in Portland, Oregon and over 100% for multi-tenant industrial and retail properties in Oregon, Washington, Utah, and Sedona (Arizona). We've been with our insurance broker for years. Is anyone else experiencing this? Is there anything that can be done?

[Ronald Rohde]

Quote from @Kim Hopkins:

Quote from @Ronald Rohde:

Quote from @John McKee:

Kim,

Your post is spot on!  I'm seeing some ridiculous increases as well.  I'm hoping to dig into my portfolio next week as well.  I'll let you know what solutions I find.  I was just talking to a large gas station operator that only does liability because the building, tanks, and gas are too much!  But I guess when you have over 200 locations and are making hundreds of millions you can do that. 

 he's essentially self insuring. Save the premiums and replace a building at a rate less than he's earning.

 Can you expand a bit on how you would analyze the cost benefit and how you would structure the reserves for self insuring? If you have  $1M general liability and $2m property coverage, I assume you're not collecting and sitting on $3M in reserves. How does this work? 

essentially, yes, you must pass on the cost of insurance. if the tenant goes bust, thats their problem, not yours. Replacement costs for CRE have gone up, premiums go up to reflect this. I'm not saying its good or bad, but it is reality.

200% from a $5,000 bill, is still just $15,000. Isn't the business generating millions in revenue? 

Yes, you should have a line of credit or cash capable of writing a check for $2-3m. We can take my portfolio as an example, I own 5 buildings with rough premiums of $20k each. $100k per year goes into the kitty to be invested. I will breakeven with one replacement claim every 20 years (fudge to 15 years for investment returns), but thats the concept.