NEW YORK CITY—In keeping with the need to be cost-conscious, mid-sized real estate firms—meaning owners, operators and developers with 10-20 properties—may sometimes shy away from hiring an insurance broker or seek out other methods of protecting their assets.
That move is a giant mistake, says Lance Ewing, leader, hospitality and leisure real estate industry practice group, AIG, in this GlobeSt.com EXCLUSIVE. Mid-sized companies face the same risks as large-scale firms yet the former have fewer risk management resources than the latter.
“All real estate firms face the threat in their buildings of assaults, security breaches or liabilities, as well as the risk of an active shooter, such as the recent incident at the Short Hills Mall, in Short Hills, NJ,” he asserts. “That happens five to 10 times a year in various retail locations.”
There are less obvious risks too, Ewing notes. “Let’s say there’s reconstruction in a multifamily building, and maybe it’s been gutted but someone didn’t flush the system and legionella develops. Or there could be methamphedamine being cooked in an apartment complex. I know everyone loves ‘Breaking Bad,’ but not when it’s your apartment complex. There are environmental issues too.”
It’s up to these mid-sized companies to address such concerns, Ewing continues. “They have to identify risks, manage and quantify them.” However, the firms sometimes are hamstrung when it comes to such determinations.
“Larger companies have a risk manager and/or a risk management department, while mid-sized companies don’t usually have those employees. They need the support of an insurance carrier or broker.”
Brokers and companies such as AIG can bring vast knowledge and resources to mid-sized firms. “We can provide resources, such as training to deal with these types of issues. At AIG, we have video training in 11 languages.”
Building owners and operators also can manage risk by inviting in guest speakers on various types of exposure. “There are experts you can bring in on a subject, such as how to train employees, training manual development, evacuations and emergencies.”
If a firm does decide though to bring in an insurance broker or provider, Ewing has some tips for finding the right vendor. “You need someone with a real estate practice who has experience handling industry claims. Many insurance companies have what they call ‘industry practice groups,’ including those are specific to real estate and other industries. If you’re talking to a firm that writes mainly medical practice insurance, it won’t be a good fit.”
Successful risk management for middle market firms also entails trust in the broker or carriers and ensuring that the insurance vendor is the best fit for the client.
Says Ewing, “You’re looking for competency, the resources they can provide, confidence that they have the background, and chemistry.”