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Specialty Lines markets Apartment and condominium market Evolution of apartment and condo complexes brings new exposures By Larry G. France This class of business can be as different as night and day depending on the geographical location and the local appetite in the housing market. In the coastal areas—if you can find a market—the pricing will be at the top of the curve. As one Florida MGA said at the recent annual NAPSLO conference when asked about the market conditions for apartments and condominiums, most carriers won’t or cannot compete with the State Plan regarding rate. Worry over future losses from hurricanes has brought the selection to a bare minimum in Florida. California has its own nemesis in the form of earthquake, but the property market there appears more readily available than wind cover in the Sunshine State. “Coastal availability for apartments and condominiums will depend heavily on whether or not the applicant needs wind coverage,” says Elmer Rivera, branch manager of Jimcor Agencies’ Long Island office in Melville, New York. “We are seeing a large number of applications coming in from coastal commercial accounts for both apartments and condos, some wanting wind and some excluding wind. Wind coverage should be a topic that some agents address with the insured upfront and make sure it is always outlined somewhere in the policy. While weather conditions is still a hot topic in the marketplace, property rates remain stable. However, once wind coverage is considered, the rates go up but can be relieved with higher deductibles,” states Rivera. Today’s apartment could be tomorrow’s condominium, as conversions have become a normal occurrence through the country. The cost to convert an apartment is less than what it would take to construct a new condo on the same piece of property. These units are priced much lower than new ones, and the buyers may be the present tenants. The downside is that some lower income tenants are forced to move out, and replacing existing living quarters may be difficult due to less available apartments and increased monthly payments. That is not the only change happening with this market. Is it a condominium or is it a hotel? The next time you stay in a hotel you may also be in a condominium complex. As reported in Executive Travel magazine, resort real estate attorney Robert M. Chasnow, who is with Holland & Knight in Washington, D.C., “estimates that there are more than 100 hotels with condo components in development across the United States.” The magazine reports that “St. Regis sold out of condos in a newly opened luxury property in San Francisco, while parent Starwood Hotels says 90% of its planned properties have a residential component.” The magazine notes that hotel companies are “using the demand for condos to fund expansion” or to pay for the higher costs associated with opening a hotel due to higher real estate prices. Another example is the Elysian, a $260 million hotel and residential condo that broke ground in August in downtown Chicago. The Chicago Tribune reported that the 60-story structure will consist of 188 hotel condo suites and 51 residential condos. The marketing of the Elysian started in 2003, and buyers have since agreed to purchase 158 units; the remainder will be sold at prices from $480,000 to $6.8 million. The plans are to expand to other large United States cities in the future. In Canada, condo development continues to set record growth, according to Matthew Sachs, marketing specialist in personal insurance, of Chubb Insurance Company of Canada. “There are several unique aspects of insuring condominium units,” says Sachs. “Most have to do with the fact that there are two responding policies that could apply to a loss, the unit holder’s personal policy and the condo corporation’s commercial policy. There also exists the potential for gaps in insurance if a loss isn’t covered by either policy. Thorough knowledge of a client’s condominium policy, specifically in the areas of contents, additions and alterations, and unit assessment coverage, will help reduce the potential gaps.” According to Sachs, “Contents is the primary type of coverage clients purchase when they buy a condominium policy, but it is also one of the most underinsured lines of business in the personal insurance marketplace. While it is easy to add up values for large items like appliances and major furniture pieces, clients often underestimate and/or overlook the replacement cost of smaller items like personal electronics, clothes, kitchen utensils, children’s toys, and tools. “For smaller units where occupants also have on- or off-site storage lockers, some policies may limit the contents coverage that extends to storage spaces and the type of perils that are covered in these locations.” Regarding additions and alterations, Sachs says, “When the unit is purchased from the builder, the purchaser is buying the standard unit and then adding upgrades according to their taste and budget. While condominium laws require condo corporations to carry insurance that protects the structure and common elements, it becomes the responsibility of individual condominium owners to insure losses to the upgrades to their unit. Gaps can emerge when such upgrades go unaccounted for and, when they do occur, they apply to all subsequent owners of the condo unit. “Upgrades can include appliances, lighting fixtures, and carpets, as well as less obvious additions such as hardware, kitchen and bathroom cabinets, countertops, floor and ceiling moldings, tile floors and hardwood floors,” he continues. Unit assessments coverage can come into play if a covered loss occurs to a common area of a condominium building. “Individual unit holders may be on the hook to pay a portion of the loss in one of several different ways,” Sachs points out. “Condominium corporations insure through a commercial policy that is usually subject to a substantial deductible. The escalating cost of commercial insurance has prompted many condo corporations to take larger and larger deductibles, assessed proportionally to each unit at the time of loss. As such, condo owners should take care to ensure their policy will respond to the full amount of their unit’s share or they may encounter another common insurance gap.” This class involves more than in the past—more types of risks, more opportunities for writing business and more chances to leave the client with gaps in coverage. The Specialty Lines Market article in the December issue will provide a preview of the 2007 market. In January we will discuss commercial vehicles, and in February, the focus will be contractors. Look for the 2007 edition of The Insurance Marketplace directory coming in December, with more than 670 coverages, programs and services. The following have responded to our survey and indicated that they are a market for apartment/condominium coverage. Arlington/Roe & Co., Inc. An MGA/wholesale broker that operates in IL, IN, KY, MI, OH and TN with GL limits of $1 million and property limits of $3 million (call for larger limits). Can offer D&O. Carriers are Nautilus, Capitol Indemnity, Lloyd’s, Northland, and Western World. Arrowhead General Insurance Agency, Inc. A program manager that operates in AZ, CA, NV, OR, TX and WA with contents coverage available in limits of $10,000, $20,000, $30,000, and $40,000. Target class is non-underwritten renters. Will not write more than 4 non-relative residents or more than 6 relative residents and mobile homes in TX. Can offer mold coverage in TX with limits of 25%, 50% and 100% of contents coverage for an additional premium; liability coverage limit included of $25,000; $50,000 and $100,000 available for an additional premium. All admitted carriers are A rated. Atlantic Star Intermediaries, LLC An MGA/E&S broker that operates nationwide (48 states) with limits that vary by program. Target classes are construction and real estate. Will not write personal lines. All carriers are A rated. Bohrer-Croxdale & McAdoo, Inc. An MGA that operates in AR, IL, KS, MO and OK with limits of $1 million/$2 million. Target class is fraternity/sorority housing. Can offer umbrella and D&O. Carriers are Scottsdale (A+), Maxum Specialty (A-), Northland (A), Capitol Specialty (A), and Capitol Indemnity (A). Boston Insurance Brokerage, Inc. An E&S broker that operates in all states. Target classes are habitational over 10 units, garden style, and condos/co-ops. Can offer D&O, liability and excess liability. A+ admitted carriers are available. Capitol Insurance Companies An insurer (call for state availability) that operates with limits of $1 million/$2 million. Target classes are small to medium-sized apartment and condo complexes. Will not write fraternity/sorority houses, occupancy rate greater than 15%, or assisted living facilities (call for more specifics). Can offer condo E&O coverage (ask for package availability). Capitol Specialty Insurance Corporation is the applicable carrier. Continental/Marmorstein & Malone An MGA/E&S broker that operates in NJ and NY state with property limits of $100 million and casualty limits of $1 million/$2 million. Target classes are condos including coastal locations, co-ops, apartment houses/complexes, mercantile/apartments, and all real estate classes. Can offer condo association liability, D&O and umbrella. Nautilus, USLI, First State, General Star, Lloyd’s, Essex, Western World, Tudor, Chubb Custom Market, and Colony are the insurers. Crusader Insurance Co. An insurer that operates in CA only with liability and property limits up to $2 million. Target class is apartments of 5 units or more. Will not write condos. Crusader is a B+ rated carrier. The Distinguished Programs Group An MGA that operates in all states except Louisiana. Limits are: commercial property, up to $50 million per location; CGL, $1 million/$2 million; commercial umbrella, up to $200 million. Target classes are apartments, condos, co-ops, homeowner associations. Will not write vacant buildings or builders risk; will not write property coverage in Florida. AIG, Chubb and Great American are the carriers. Evolution Insurance Brokers (EIB International) An E&S broker that operates in all states with all limits. Will consider all classes. Can offer monoline liquor, assault and battery, and after 3 a.m. closing time. Prime Insurance Syndicate is the B+ rated carrier. Excel Insurance Service, Inc. An MGA/E&S broker that operates in NJ and PA with limits of $100 million. Target class is all apartments and condos including coastal. Various A rated carriers are used to place coverage. Gary Markel Surplus Lines Brokerage., Inc. An MGA/E&S broker that operates in FL only with limits of up to $10 million. Can offer property, GL, umbrella, tenant discrimination, and condo/homeowners association D&O. Will not write auto or flood. Various A rated carriers are used to place coverage. Gateway Underwriters Agency An MGA/E&S broker operating in AR, IA, IL, KS, MO and NE. Can offer property, package and GL. Nautilus, Western World, USLI, and Oak River are the carriers. Gray-Stone & Co. An agency/E&S broker that operates in all states except AK, SD and WY with standard limits of up to $50 million. Target class is apartment/condos. Will not write student housing, senior housing or HUD. Can offer workers comp, umbrella, D&O, fiduciary, bond, and owned auto. St. Paul Travelers (A+), Century Surety (A-), OneBeacon (A), and Evanston (A) are the carriers. Great American Insurance Group, Executive Liability Division An MGU that operates in all states with limits of $5 million. Target classes are condo associations and homeowner associations. Great American is the A rated carrier. Harry W. Gorst An MGA/E&S broker that operates in CA only with GL limits of up to $10 million. Target classes are apartment buildings consisting of 5 units or more, or condos, homeowners, and associations where all development and construction operations have been completed. Will not write apartment buildings consisting of 4 units or less, or any risk with a mold loss for which proof cannot be obtained that 100% remediation has occurred. Can offer earthquake. Scottsdale (A+), Colony (A), Western Heritage (A+) and Markel International (A) are the carriers. Hermitage Insurance Co. An insurer that offers surplus lines in AL, CT, DC, FL, IA, IL, IN, KY, LA, MA, MI, MN, MO, MS, NC, ND, OH, OK, OR, SC, TN, TX, VA, WV and WI and is admitted in GA, NJ, NY, PA and RI. In-house limits are $1 million; $3 million with facultative. Target classes are 1-4 family rented dwellings, apartment buildings, apartment buildings with mercantile exposures, and homeowners associations. Will not write condo-owners, homeowners, tenants, or condo associations. Can offer liability. Carriers are rated B++. Hospitality Insurance Solutions An MGA that operates in all states except AK, HI and TX. Target classes are resort condos and timeshares. Will not write apartments and owner-occupied condos. Can offer property, liability, crime and boiler. Discover Property & Casualty is the A+ rated carrier. Insurance Center Special Risks, Ltd. An MGA that operates in CT, MA, NH, NY, RI and VT with GL limits of $1 million/$2 million and property limits of $1 million. Target classes are 1-2-3 family dwellings, tenant occupied, and small apartment buildings. Will not write subsidized housing or student housing. Can offer tenant discrimination, flood, outbreak, and extra expense. The A rated carriers are Essex, Lloyd’s, and Colony. Insurance Innovators Group An MGA operating in DE, MD, PA, NJ and NY with GL limits of $1 million/$2 million/$1 million plus umbrella or excess (property varies). Can offer D&O. Various A rated carriers are used to place coverage. International Brokerage and Surplus Lines, Inc. An MGA that operates in all states except MA, NH and PA with limits of up to $1 million-$2 million. Target class is apartments/condos. Requires strict guidelines for subsidized housing. Markel is the carrier. IT Risk Managers, Inc. An E&S broker that operates in all states (depending on product and market) with limits of up to $10 million (excess limits of $1 million). Target class is technology companies. Can offer all coverages—GL, property, EDP, and professional liability. All carriers are rated A or better. Jacobs & Associates An E&S broker that operates in OH only with GL limits of $10 million and property limits of $20 million. Target market is any and all apartment/condo buildings. Will not write knob & tube wiring. Can offer equipment breakdown, boiler, crime, inland marine, and hired/non-owned auto. Scottsdale, Western Heritage, Colony, Wellington, Mt. Vernon, USLI, Lloyd’s, General Star, Indian Harbor, and United National are the carriers. James River Insurance Company A nonadmitted insurance company that operates in all states except NH and OH with GL limits of $5 million; no primary property (excess property to $15 million is available). Target class is GL on all sizes of accounts to approximately 10,000 units including student, HUD, and elderly housing. James River is an A- rated company. Jimcor Agencies An MGA/wholesaler operating in MA, NJ, NY, PA, OH and WV with high limits available for both liability and property. Target class is all sizes of habitational risks. Can offer umbrella and excess flood. A- or better carriers are used to place coverage. K&B Underwriters A wholesaler that operates in all 50 states and DC; contact for details regarding limits. Target class is health care, especially eldercare and med mal. Klinger Associates, Inc. An E&S broker that operates in IN and the Midwest with limits of $50 million-plus. Target classes are builders risk, agreed amounts, replacement cost, package, and multiple locations. Will not write government. All carriers are A rated. M.J. Hall & Company, Inc. An MGA/E&S broker that operates in AK, AZ, CA and NV with limits of $1 million-$25 million or more. Target class is apartments older than 25 years/condos. Will not write 100% HUD (except senior citizens). Can offer property, crime and D&O. All carriers are rated A- or better. McGraw Insurance Services A general agent that operates in AZ, CA, GA and TX with the following limits: HO-4 Cov. C to $100,000; HO-6 Cov. A to $100,000 (GA); to $150,000 (AZ, CA TX); Cov. C to $250,000. Target is primary, seasonal and tenant occupancies. Can offer personal liability up to $300,000. Pacific Specialty is the A rated carrier. Metcom Excess An MGA/E&S broker that operates in NJ, NY and PA with limits of $1 million. Can offer umbrella and D&O. All carriers are A rated. Midlands Management Corp. An MGA operating in AR, KS, MO, OK and TX with various limits and carriers. Target class is apartments. Can offer general liability. NIF Group, Inc./NIF Pro An MGA/E&S broker that is admitted in all states and nonadmitted in the eastern U.S. and offering limits of $3 million/$3 million. Target class is condo associations. Can offer E&O, umbrella and excess. All carriers are A rated. NorthCoast Excess & Surplus Agency, Inc. An E&S broker that operates in OH only with GL limits of $2 million/$2 million/$2 million and property limits of up to $10 million per location. Target class is apartments/condos. All admitted and nonadmitted carriers are A rated. Prime Insurance Syndicate, Inc./I.E.B.S. An MGA (IEBS)/insurer (Prime) that operates in all states except AK, CA, CT, LA, NH, NY, RI, TX and VA. Will consider all classes and all limits. Can offer monoline liquor coverage, assault and battery, and after 3 a.m. closings in the hospitality industry. Prime is rated B+. RISC Inc. An MGA/E&S broker that operates in the continental United States except in AK with limits that are available by risk. Target class is apartments/condos. Will not write crime. Can offer GL, umbrella, and hired/non-owned auto. All carriers are A rated. Roush Insurance Services, Inc. An MGA that operates in IL, IN and OH with GL limits of $3 million (excess limits of $10 million plus available), and property limits of $15 million (higher limits may be available). Target class are all types of apartment, condos and townhouse buildings or complexes, including those with mercantile exposure. Can offer D&O, loss of rent, equipment breakdown, excess liability and builders risk. Scottsdale Insurance (A+), Scottsdale Surplus Lines (A+), Essex (A), Evanston (A), Century Surety (A-), and Atlantic Casualty (A-) are the carriers. Russell Bond & Co., Inc. An MGA/E&S broker that operates in CT, MA, NJ, NY, PA and VT with primary limits of $1 million plus $40,000 umbrella, personal property limits of $200,000 and improvements/betterments of $100,000. Target classes are risks with claim experience, dog exposures, secondary, seasonal, and co-ops. Can offer D&O, tenant, discrimination and watercraft. All carriers are A- or better. S.H. Smith & Co. An E&S broker that operates in all states with limits of $1 million and up. Target classes are condos and distressed properties. Can offer nonprofit D&O. All carriers are A rated. S.I.U., LLC An MGA/E&S broker that operates in AZ, CA, NV and OR with GL limits of $2 million, property limits of $5 million and excess of $5 million. Target classes are apartments/condos and commercial businesses. Will not write student housing or subsidized housing. Can offer equipment breakdown up to $5 million. All carriers are A- rated. Southern Insurance Underwriters, Inc. An MGA that operates in AL, GA and SC with limits of up to $50 million. Target classes are apartments/condos. All carriers are rated A or better. Swett & Crawford An MGA/E&S broker that operates nationwide with limits as needed. Target class is a minimum of 6 units. Will not write small residential. Can offer GL, fire, D&O, DIC, umbrella and builders risk. All carriers are rated A- or better. Unifax Insurance Systems, Inc. An MGA that operates in CA only with liability and property limits of up to $2 million. Target class is apartments of 5 units or more. Will not write condos. Crusader is the B+ rated carrier. W.H. Greene & Associates An MGA/E&S broker that operates in NY state with CGL limits of $1 million/$2 million/$2 million and property limits of $5 million (possibly more). Target classes are buildings under 3 stories, less than 50 years old, 1-2 family rentals. Will not consider property managers as additional insureds, student housing, fraternity/sorority houses, elderly or assisted living. Can offer CGL, property, package, and D&O. Tower is the carrier. Western World Insurance Co. An insurer that operates in all states with GL limits of $1 million/$2 million and property limits of $500,000. Target class is smaller, lighter risks. Western World is rated A+ as is Tudor. WKF&C Agency, Inc. An MGA that operates in all 50 states with GL limits of $1 million/$2 million, MPL of $2 million, and property limits of up to $25 million. Will accept all classes of habitational risks. All carriers are rated A+. Yates & Associates Insurance Services, Inc. An MGA that operates in CA only with limits of up to $25 million. Will consider all classes. Can offer water damage. All admitted and nonadmitted carriers are A rated. * |
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