Recent trends have shown that construction costs throughout the United States and Canada have escalated at an accelerated rate, particularly in specific metropolitan regions. This is due to a combination of factors, including price increases for building materials and rising labour costs due to a rebound in construction activity since the recession of 2009. Areas such as Seattle, Los Angeles, Vancouver and Toronto are emblematic of the rise in construction cost, as market values have rebounded.
Source: Pixabay
As a result of these cost increases, many commercial and residential properties are at risk of being under-insured. This is especially so for Condominiums that are situated in many of these city centres. It is therefore prudent to assess if the source and accuracy of your Condominium’s Insurable Value are reliable.
Common Pitfalls
It is not uncommon for Directors and Property Managers of Condominiums to be so heavily involved in other issues that they often forget the importance of having an accurate determination of the Replacement Cost of the standard unit and common elements of their Condominium. As a result, the Insurable Value they report may have come from a variety of less-than-reliable sources including:
1) Use of Developer’s Construction Costs
In many cases, the Insurable Value may have been based on the Developer’s construction cost. This amount may not include “soft costs” such as Architect Fees, Development Fees and General Contractor Fees. These are significant costs that should be included in the Insurable Value of the Condominium. In addition, a Developer who is building multiple condominiums can also achieve efficiencies in regards to material and labour costs. The reduction in these costs may result in a lower construction cost for the Condominium, which may not be achieved in the event of a loss and reconstruction of a single building. In most instances, the Developer’s construction cost can be approximately 20 to 40% less than the Replacement Cost of the Condominium.
2) Extended Indexing of Insurable Value
Once an Insurable Value exists, many Insurers/Insurance Brokers may use the annual Consumer Price Index (CPI) to update the Insurable Value of the condominium for an extended period of time. The annual CPI has been reported in the 1-2% range in recent years. In contrast, construction costs in some locales has been have been averaging double this amount. In addition, if the original construction cost that is being indexed is incorrect it can compound the error substantially over the years. Lastly, even with a correct original construction cost and accurate Inflation Index Factors, an Insurable Value should not be indexed up for more that three consecutive years.
3) Estimates from Unqualified Parties
In an attempt to save costs, some firms who lack architectural costing experience may develop a Replacement Cost estimate on a cost per square foot basis only. This methodology is not reliable since it may not consider location, construction quality and many of the important specialty features of the Condominium’s construction and services. Many of the construction details of a Condominium can only be verified by a physical inspection and comprehensive review of the architectural and site plans. In addition, the firm that completes the estimate should have specific architectural costing experience versus market value appraisal experience. Market value appraisals consider many other factors that are not relevant to the Insurable Value.
Insurance Appraisals By Qualified Professionals – The Most Accurate Source for Determining Insurable Values
An Insurance Appraisal is a formal estimate or opinion of value on a property as of a specified date. The premise of value developed should be the Replacement Cost New (RCN) of the standard unit and common elements of the Condominium. This value is based on a physical inspection, review of the building plans (architectural and site) and the development of current construction costs. Appraisal Firms use various construction costs from published sources including Marshall & Swift/Boeck, R.S. Means Construction Cost Data and Handscombe’s Yardstick for Costing. A reputable Appraisal Firm will also cross-reference this data with actual construction costs (including soft costs) reported by Contractors and Developers. Finally, construction costs of similar condominiums appraised should be used as a benchmark test to ensure the Insurable Value is correct. It is important that the Insurance Appraisal Firm you engage use as many of the above resources to develop an accurate Insurable Value.
Qualifications of Reputable Appraisal Firms
To select a reputable Appraisal Firm, it is recommended that they meet the following qualifications:
- The Firm carries Errors and Omissions Insurance;
- The Appraiser(s) have an educational background in Architectural Costing or Engineering;
- The Appraiser(s) are experienced at completing Insurance Appraisals for Condominiums;
- The Appraisal Service includes both Above Grade and Below Grade Assets;
- The Appraisal Service is performed in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP); and
- The Appraiser(s) reviews Architectural Plans, Site Plans and Standard Unit-By Law (if applicable).
In conclusion, it is prudent for the Directors and Property Managers to engage a Professional Appraisal Firm to complete an Insurance Appraisal of their Condominium. Furthermore, many of the Declarations and By-Laws of Condominiums specify the frequency that Insurance Appraisals should be completed (e.g. every three years). Lastly, the Condominium Acts of many of the jurisdictions have sections requiring the Condominium be insured for its Replacement Cost. Compliance with these guidelines can be best achieved by having a reputable firm complete an independent Insurance Appraisal.
We are attending the next RIMS Canada Conference, the preeminent convention and trade show for risk insurance managers and Insurance Brokers from Canada.The conference is being held in Edmonton, AB from September 8-11th, 2019.
Event Location & Dates
Address: Shaw Conference Centre – 9797 Jasper Avenue, Edmonton, AB, Canada, T5J 1N9
Dates: Sunday September 8th to Wednesday September 11th, 2019
Visit Us At Booth #200
We have a stand booked for booth #200, so come on down to visit us and speak to one of our knowledgeable representatives! Booth #200 is close to the entrances. Just turn left when you walk into the booths area, and you should see our team! See the map below to get a better idea of where you’ll find us.
We Have Prizes!
We are going to do a Plinko style game with prizes! Come have some fun with our reps.
Share On Social
We encourage attendees to share their experience across social media channels! If you do so, feel free to use hashtags like #Appraisers, #ValuationServices, #ExpertTestimony, #FinancialServices, #RiskControl, #LossControl, and #SafetyServices etc. to further your reach to relevant viewers.
Event Organizers Video
Below is a fun video made by the event organizers to give you a better idea of what the conference is all about and why one should attend!
We Hope To See You There!
We hope to see you at the event in September. Remember, come visit us at Booth #200 to speak to any one of our awesome reps. Make sure you participate in our Plinko style game for your chance to win some nice prizes too! We are always here to answer any questions you may have, so feel free to contact us if you need to speak to one of our reps prior to the event.
Contact Suncorp Now
1 Full Time Permanent Data Management Coordinator
Saskatoon Office
Competition Number: DC-SK-19-15
Headquartered in Saskatoon, Suncorp Valuations is a dynamic growth-oriented leader in the global valuation industry. Through offices in Canada and the U.S.A, we offer a full range of valuation, consulting and costing services for land, buildings, machinery and equipment, and for intangible assets such as patents, copyrights and franchises.
Utilizing robust research methodologies, valuation consultants develop reports that provide an opinion of value for built property and other assets. Clients utilize reports for a variety of requirements including regulatory compliance, financing, litigation support, mergers and acquisitions, purchase price allocation, insurance placement and claim settlements. Risk Management Services assist clients by identifying and mitigating risks such as the potential for accidents, property damage and theft. For further details please refer to our website at www.suncorpvaluations.com.
The Role.
We are seeking a Data Management Coordinator to join our Professional Services team. The role reports to the Vice President, Professional Services in Saskatoon.
The Data Management Coordinator is responsible for the acquisition, verification, analysis, and storage of a variety of data types. The data is utilized by the Professional Services teams to develop credible professional estimates, opinions, and consulting services.
The Ideal Candidate.
Along with the required credentials, you enjoy working with a group of professionals and excel at research and data management. Although you are able to work independently, you enjoy leveraging the knowledge of coworkers. You have no problem working independently, while collaborating with stakeholders in other offices. You easily manage multiple projects and are naturally focused on providing internal stakeholders and external clients with high levels of service to meet our Brand Promise of ON TIME, CREDIBLE, PROFESSIONAL. You have solid ability to gather thorough information while at the same time finding efficient ways to complete assignments.
The Requirements.
- Certificate or Diploma from a recognized institution in research and/or data management, or equivalent complementary discipline.
- 1+ years of relevant experience.
- Expertise with MS Office, particularly with Word and Excel.
- Excellent interpersonal skills and the ability to work well with all levels of internal management and staff, and external stakeholders.
- Excellent project management and time management skills including the ability to manage multiple tasks and meet deadlines.
- Basic understanding of building design, real estate terminology, and financial analysis is an asset.
The Competencies.
- A genuine desire to go above and beyond to provide excellence in support services;
- Proactive, with a desire to drive results and exceed goals;
- Strong planning, organizational and time management skills;
- Solid computer skills, including advanced knowledge of Microsoft Office Suite;
- Able to work with complex spreadsheets;
- Excellent oral and written communication skills with acute attention to detail;
- Expert project planning skills with the ability to work on multiple tasks;
- Able to collaborate, share knowledge and leverage expertise as needed;
- Self-directed with the desire and ability to work independently.
We pride ourselves in offering flexible work arrangements that allow our employees to balance work and life commitments.
THE APPLICATION PROCESS:
Please send your resume, cover letter and compensation expectations via email and include in the subject line the competition number, followed by your first and last name.
E-mail: HR@suncorpvaluations.com
Comp #: DC-SK-19-15
Deadline: September 13, 2019
We thank all applicants for their interest in this position, however, only those selected for interviews will be contacted. Please note that we do not accept phone or email inquiries in regards to open positions.
Valuation Consultant
Suncorp Valuations is a full service appraisal and valuation consulting firm. From offices in Canada and the U.S.A. we provide global valuation services for land, buildings, machinery and equipment, that is used for financing, litigation support, mergers and acquisitions, and insurance placement purposes. For more information on our services please visit our website at www.suncorpvaluations.com.
The Role.
This full time entry level position is located in Grafton Wisconsin and reports to the Senior Managing Director, Industrial Valuation Group. The focus of work is on the development of valuation reports for industrial properties. This includes, but is not exclusive to banks, public and private companies, insurance companies, private equity groups and insurance brokers. Through site inspections, research, expert analysis and collaboration, you will develop a solid and defendable rationale for the final value assigned to a property. This requires the ability to develop, accurately prepare and present defendable conclusions of value, using the cost, market and income approaches to value.
The Ideal Candidate.
Along with the required credentials, you enjoy working with a group of professionals and excel at research and analysis. Although you are able to work independently, you enjoy leveraging the knowledge of coworkers to complete accurate assignments. You have no problem working in a small office while collaborating with stakeholders in other offices. You easily manage multiple projects and are naturally focussed on providing internal stakeholders and external clients with high levels of service. You enjoy a role that provides in-office work, client interaction and travel to perform on-site investigation of client assets.
On a personal note, you are interested in developing your career through participation in internal and external professional development and enjoy a role that provides a combination of office work and travel to client sites.
The Requirements
- University Degree or Diploma in a complementary discipline; Finance, Economics, International Business, Engineering, Physical Sciences, Construction, Architectural Technology or a related field;
- This is an entry level position;
- Knowledge of machinery, equipment and/or buildings and a working knowledge of finance would be considered an asset;
- Valid Driver’s License, clean driving abstract and access to safe, reliable transportation.
- Willingness to travel to client sites, including extended stays, and international travel;
- Bone fide requirements of the position include possession of a current or ability to obtain a valid North American passport and no restrictions that impact obtaining a VISA.
The Competencies
- Strong customer services skills;
- Proactive, with a desire to drive results and exceed goals;
- Strong planning, organizational and time management skills;
- Solid computer skills, including advanced knowledge of Microsoft Office Suite;
- Able to work with complex spreadsheets;
- Excellent oral and written communication skills with acute attention to detail;
- Expert project planning skills with the ability to work on multiple tasks;
- Able to collaborate, share knowledge and leverage expertise as needed;
- Self-directed with the desire and ability to work independently.
The Application Process
Please send your resume, cover letter and compensation expectations via email and include in the subject line the competition number, followed by your first and last name.
We thank all applicants for their interest in this position, however, only those selected for interviews will be contacted. Please note that we do not accept phone or email inquiries in regards to open positions.
In our last blog post we talked about the importance of understanding your client’s exposure, values, risk management strategies and policy wording – especially when dealing with a hard market in the insurance industry like we are today.
READ: The Property Insurance Market Has Hardened
Challenges Facing Brokers and Clients Is Significant
With Insurance Companies tightening their underwriting requirements, increasing premiums and deductibles, and reducing limits, the challenges facing brokers and their clients is significant. Placing a client’s business – regardless of whether they have had a claim or not – can be a daunting task, and where you might have had 2 or 3 insurance companies on a risk before, today we are seeing upwards of a dozen companies now involved.
Advantages of Comprehensive Risk Assessment Reports
Having a comprehensive Risk Assessment report on your client’s operation is a huge advantage for brokers to successfully market their client’s business to the industry. This third party, arm’s length report provides an objective overview of your client’s operation – the hazards associated in the operation and the controls in place to manage these hazards – so that the underwriter has an excellent picture of the risk, they are preparing to take on.
Understanding Different Types of Clients
While many insurance companies today will categorize clients based on, the type of business they operate, this “broad brush” approach can affect many clients with limited or no loss experience. The residential/condominium market is a good example of an industry that has been hit hard given the high number of losses in this type of occupancy. However, in saying this, not all clients will fall under this category. Understanding what separates these clients from the rest is the message that needs to get across.
Solid Risk Management More Critical Than Ever
The insurance market is still well capitalized, however, insurance companies are becoming more selective to write only good quality risks. Solid risk management strategies are now more than ever a critical component for managing your client’s business. A comprehensive Risk Assessment report will provide you and your client with an invaluable tool to assist in mitigating losses, while at the same time providing you the leverage to differentiate your client’s business from the masses during insurance renewals or placement.
Our Risk Management & Valuation Services
If you have any questions on the various Risk Management and Valuation services we can provide, please contact one of our offices, we would be happy to help.
Contact Suncorp Now
In our February 2019 Industry Insight article, we looked at the insurance industry focusing on building resilience with those insured to be prepared for natural disasters. The underlying premise being that natural disasters will occur; it is no longer an “if”, it is about the when.
In that article, we pointed to the insurance markets hardening to face the pressure of mounting losses. We are now in the midst of a hard property market and the impact on renewals and premiums is certainly felt.
“Characteristics of Soft and Hard Markets.
A strong economic climate, a favorable legal environment and/or few catastrophic events can increase insurers’ capacity, creating a soft insurance market. When the market is soft many insurers are competing for business and premiums are generally low. Insurers relax their underwriting standards and coverage is widely available. Underwriters are generally flexible and willing to negotiate coverage terms. Broad coverage is available with some extensions available for free.
A series of catastrophic events, a litigious legal environment and/or a poor economy can reduce insurers’ capacity to write new policies. The result can be a hard insurance market. A hard insurance market is the opposite of a soft one. When the market hardens, insurers tighten their underwriting standards. Some coverages may be difficult to secure as fewer insurers are competing to write policies. Premiums are relatively high and insurers are disinclined to negotiate terms. Broad coverage may be costly or unavailable but some coverage extensions may be available for an additional premium.” (1)
As the chart below depicts, we do have catastrophic events and their costs rising, which are having a direct impact on the insurance market hardening (2).
We are seeing the insurance market acknowledge the hardening of the property market and what that means for insureds, brokers, and property managers in property markets.
“At the end of 2018, the property market had begun to see some firming, and that continued into Q1 of 2019. As we move into Q2, this trend has not just continued; it has accelerated.”
“The message for retailers is that things are changing in property more quickly than expected, and the changes are deeper than anticipated,” says Harry Tucker, Executive Vice President and National Property Practice Leader for AmWINS.
Adverse loss development has been a catalyst in this acceleration. Two consecutive years with combined ratios exceeding 100% across the market has heightened the focus of management teams and underwriters to drive rate and reduce aggregate exposure. Increasing rates are creating a deeper and broader change in the market. The obvious tough classes – including frame habitational, recyclers, and open lot – were the first to be affected, but now the trend has crept into broader classes and non-CAT exposed business.
“Along with rate increases, we are seeing more tightened risk selection, reductions in limits, increased deductibles, and close review of policy forms,” says Tucker.
However, the bright spot for clients is that the market is still well capitalized. “Carriers still want to write premium,” says Tucker. “The difference today is that they are applying a level of underwriting discipline we haven’t seen in quite some time.”(3)
The below graph graphically depicts the pricing trends in property renewals (4):
As property owners and/or tenants, brokers, and property managers, we would encourage you to look at your insurance program against the backdrop of the increase in natural disasters driven by climate change and the changes to occurring as underwriters are dealing with these variables as they develop insurance premiums. You need to understand your exposure, your values, your risk management strategies and your policy wordings. Being forewarned, will assist you exponentially in the event of a loss.
Discuss Property Appraisal w/ one of our Pros!
