Risk Management - Large Property Group What was the problem? One of the largest commercial property owners in the Wellington CBD was alerted by their broker to expect an increase in asset premium of at least 20%. This was driven mainly by the lack of earthquake insurance and higher increases in liability premiums. The client had: • Commercial property insured with a total replacement value of    almost $200m • A number of insurances for various risks of third party and statutory    liability per property • A mix of asset insurance deductibles ranging between $500 to    $25,000 per loss for fire and other perils and between 1% to 10%    of loss for earthquake • A very low level of claims experience • A good well managed portfolio of property • No means to pass on increases in premiums to many of their tenants. What did we do? BDC's team: 1. Compiled a register of all existing insurances to ascertain the levels of loss funding the client was carrying under certain perils. 2. Divided the property portfolio into various homogeneous groups to better explain the risk to prospective underwriters and to consider the risk profiles of each group. 3. Inspected all properties and compiled an underwriting information profile for prospective underwriters including risk assessments with calculation of Maximum Possible Loss (MPL) by asset and risk and for the whole portfolio 4. Carried out an intensive exercise on earthquake loss potential using engineering reports in the public domain. 5. Liaised with the Company's valuer about the methodology of valuations required. 6. Put forward a range of possible options for the client to gauge its risk appetite. 7. Explored alternative insurance markets for the client. 8. Prepared a schedule of alternative covers for the client to obtain quotes from their existing insurance broker. 9. Analysed the alternative quotations and presented a recommendation to the client. What was the outcome? The renewal cost received from the existing broker was 35% lower than originally indicated. In addition the client has improved levels of cover for all classes of risk and more importantly understands the nature and extent of the insurance programme, and the roles of the various players in the market. The client now has legal liability cover appropriate to its various activities in the property market, some of which had not previously been covered. The cost of the broker's employment is now reasonably transparent. There have been five other areas of administrative or insurance improvement that have been signalled to the client. An opportunity has been created to pool this property with others across New Zealand and make use of other loss funding mechanisms in the future. Back