Chris Conlon is passionate about insurance.
Before becoming one of the apartment industry’s few insurance specialists as director of risk management at St. Petersburg, Florida-based Mahaffey Apartment Co., Conlon was a member of Tampa, Florida-based commercial real estate and insurance brokerage firm Franklin Street.
“I’m one of those few insurance nerds out there,” he told Multifamily Dive.
As the cost of insurance premiums jumped over 100% in his home state this year, Conlon has become quite popular — being interviewed in publications and sitting in on panel discussions to share his tips for dealing with the crisis.
When Conlon surveys the market and talks to people around his home state of Florida, he has noticed that all rental housing owners, regardless of size, are facing the same issues.
“The biggest thing for owners and operators in the multifamily space is that everybody's going to get a really bad increase,” Conlon said. “There's really no way that you're not going to get an increase in this market. However, there are steps you can take to mitigate what that number looks like.”
Here, Conlon talks with Multifamily Dive about the importance of starting negotiations early, using a specialty agent and a new Florida law designed to address the issue.
This interview has been edited for brevity and clarity.
MULTIFAMILY DIVE: What kind of insurance premium increases are you seeing in your portfolio?
CHRIS CONLON: We've seen well over 50% increases for the portfolio depending on construction type and location. However, we've seen 1,000%-plus increase renewal offers from carriers that we've been on policies with for the better part of four or five years, not to say that we purchased insurance with those particular carriers. We’re in pretty low-risk areas considering we’re in central Florida, even though the entire state is considered tier-1 wind [on the Saffir-Simpson Hurricane Wind Scale]. It's definitely less of a risk, but you're still seeing those increases wherever you go.
What is causing this problem?
It has a lot to do with reinsurance rates increasing upwards of 45% to 60%. At the carrier level, there's just a pure lack of competition as programs and players have pulled out of the space. There's no capacity to build valuations out on policies as replacement costs from a construction standpoint have increased close to 40%. However, there are a few things you can do to mitigate what that increase looks like.
How are you limiting these increases?
You really have to partner with a specialist in the world of insurance — companies that just specifically work in multifamily. That’s a big thing. There are a plethora of generalists out there. You're either one or the other in the insurance world.
Why should apartment owners find brokers who are multifamily specialists?
Those specialist groups just know what markets are out there. They have really good existing relationships with underwriters at carriers and they have great relationships with wholesale brokers who have even better relationships with carriers. You're still going to get the increase. But you may get some ancillary coverages and you may get a little more value in your policy just because of how much insurance you're writing through a particular wholesaler or underwriter.
Generalists work on auto, workers comp and other things. They can probably find you a policy, but it's not going to be where you would be with a specialty insurance group. So, there's real value in partnering with somebody who has that experience,
Why is it important to start renewals early?
As a risk manager, I'm an advocate of making sure your agent is shopping your policy at 120 days before your renewal. That is the first day that your agent can take your application for your property, submit a renewal submission to the carriers and start shopping around. If your agent isn't doing that, then they're not really doing you a service.
Florida’s statute is 15 days to get your comprehensive loss history. You should at the minimum request a current values history starting with the last three years. And if your agent isn't giving you that, you can file an Office of Insurance Regulation complaint to release them. They have to give you that.
Make sure you're shopping extremely early. I made sure we completed Marshall & Swift Valuations and replacement cost appraisals for properties we would have valuation discrepancies on going into this renewal. I knew valuations would be extremely different from last year with insurance carriers and even lending partners.
Florida Gov. Ron DeSantis recently signed two bills — House Bill 837 and Senate Bill 2-A — covering insurance. How will these help apartment owners?
These are meaningful pieces of legislation. They are really going to have meaningful reforms, and they should reduce claims severity and should increase competition over time in efforts to make Florida look more insurable. Claims are what killed the market in Florida, like one-way attorney fees and abuses in the legal system. That really killed the homeowner’s market.
What people don't understand is that reinsurance capital is the same capital for homeowners’ policies and commercial policies. It's not different. So, what happens in the everyday consumer market affects the multifamily market.
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.
