Property Insurance Insights for Affordable Housing Organizations

Mar 17 2020

By Nathan Kerr, Vice President, Affordable Housing Practice Lead, Scott Insurance

Today’s challenging insurance marketplace is impacting organizations working in various sectors of affordable housing – from developers to property owners/managers to investors. While each business has unique characteristics and risks that affect pricing, these general market observations can help affordable housing organizations prepare during this difficult market.

What is Driving Property Rate Increases?

Recent Catastrophe Losses & Underpricing
Looking back, 2017 brought near-record highs in U.S. catastrophe losses due to the hurricane trifecta of Harvey, Irma and Maria. While 2018 saw a reduction in these losses (down to $37 billion from 2017’s $53 billion*), Hurricane Michael and historic wildfires in California made it the second highest loss year since 2011.  While we did not see the same levels of hurricane and flood losses in 2019; the property market was not immune to wildfires, heavy winds and hail losses. 

Due to these natural disasters, as well as attempting to rebound from multiple years of underpricing, property rates have been on the rise for nearly every industry.  Habitational risks have seen some of the greatest increases – especially those in catastrophe-exposed locations.

Insurance-To-Value
Insurance-to-value (ITV) is the insurance term for the amount of protection in place to cover the replacement cost of a property.  Due to the many factors contributing to rising construction costs, including a lack of skilled workers and higher material costs, insurance carriers are focusing on ITV to make sure their portfolios are not underinsured.  Increased property valuations naturally lead to higher premiums is creating tension between insurance carriers and the affordable housing industry. 

How Can Affordable Housing Organizations Combat Property Insurance Rate Increases?

  1. Make sure your insurance program is appropriately structured to combat the current ITV push:
    • What methods are you using to determine replacement cost values for your properties?
    • Is the Agreed Amount Endorsement on your policy?
    • Are your properties specifically scheduled or covered under blanket coverage?

  2. Employ risk management/mitigation practices:
    • Does your organization have a holistic risk management program (workplace safety, incident preparedness, disaster response planning, etc.) to mitigate the risk of claims?
    • When losses do occur, do you have a strategic process to manage claims appropriately, minimize resident displacement and expedite a return to normal operations?
    • Are you taking advantage of contractual risk transfer practices to minimize your risk?

  3. Work with a knowledgeable broker who understands the Affordable Housing Industry and can place your coverage appropriately:
    • Your broker should strategically and deliberately plan for insurance renewals, including selecting underwriters who have familiarity with the industry, and preparing complete submissions telling your organization’s story.

* Source: AM Best, a global credit rating agency focused on the insurance industry.

Nathan Kerr is a Vice President and leads the Affordable Housing Practice Group for Scott Insurance.  He works as an advocate, advisor, and broker, helping affordable housing organizations manage their unique risks and lower their total cost of risk so they can focus on their mission of improving lives and communities. Nathan can be reached at  or 540-224-1774.