Navigating the Storm: Understanding the Impact of Extreme Weather on Apartment Building Insurance

In the past two decades, the real estate industry, particularly apartment building owners and managers, has witnessed a significant shift in the landscape of property insurance due to the increasing frequency of extreme weather events. This article aims to shed light on this phenomenon and offer a solution to mitigate its financial impact.

1. The Rise of Extreme Weather Events

The last 20 years have seen a "staggering rise" in extreme weather events, attributed largely to climate change. From 2000 to 2019, there were 7,348 major natural disasters globally, compared to 4,212 in the 1980-1999 period. This increase is marked by an 83% jump in climate-related disasters, with major floods more than doubling and severe storms rising by 40%​ (Yale Environment 360)​.

2. The Financial Toll on Insurance Claims

The surge in extreme weather events has had a direct impact on insurance claims. In 2023 alone, NOAA reported 6,962 hail events, a significant increase from the 4,436 events in 2022​ (III Website)​. This uptick has resulted in a substantial rise in insurance claims, with companies like State Farm paying out over $3.5 billion in hail claims in 2022, marking an increase of more than $1 billion from the previous year​ (III Website)​.

3. The Bottom Line for Apartment Building Owners

For owners and managers of apartment buildings, this trend poses a significant challenge. Most primary property and casualty policies for buildings include a deductible for claims resulting from wind, rain, and hail damage, which is often a percentage of the building's Fair Market Value (FMV). For example, a 1% deductible on a $40,000,000 apartment complex with 30 buildings and 300 units would result in a deductible of $400,000. This can have a profound effect on the bottom line, especially in the face of increasing extreme weather events.

The Solution: A Surplus Policy to Eliminate Deductibles

To combat this financial strain and provide comprehensive coverage, we've created a surplus policy that not only protects against future damages but also addresses any unclaimed current or past damages. This innovative policy is designed to eliminate 100% of the special loss deductible, ensuring that apartment building owners are not left with financial liability from previous weather-related events. By opting for our surplus policy, owners can secure peace of mind and financial security, knowing that their investments are protected against the unpredictable nature of extreme weather, without the burden of hefty deductibles. This all-encompassing approach ensures that your property is safeguarded, regardless of when the damage occurred, providing a robust safety net for your real estate assets.

In conclusion, the rise in extreme weather events over the past two decades has brought about a new set of challenges for apartment building owners and managers. With the increase in insurance claims and the potential financial impact of deductibles, it's more important than ever to explore alternative insurance solutions like surplus policies. By staying informed and proactive, owners can navigate the storm and safeguard their investments for the future.