Services

Lenders Insurance Review

Your borrowers’ exposures to loss are not static... they are continually evolving.

Have you considered:

  • Most large commercial borrowers still do not purchase Terrorism Coverage?
  • Your coastal customers may not be protected against catastrophic weather related damage? Wind, Flood, Storm Surge? Are you aware that many carriers are denying the windstorm damage resulting from Hurricane Katrina?
  • A certificate of insurance gets you nothing in a court of law? Yet, lenders and investors still rely on this unenforceable document to secure their risk. Are you sure that your collateral is properly protected? A certificate of insurance provides no meaningful protection. Brokers like to deliver “certificates of insurance, because they can be issued without the approval of the insurance carrier. Are you comfortable with a document that the insurance carrier is not bound to?
  • A certificate is issued as a matter of information only and it confers no right upon the certificate holder. A certificate does not amend, extend or alter the overages afforded by the policies below.” Does this document help you sleep better? It shouldn’t. There is more appropriate documentation that will provide you with enforceable evidence of coverage. But evidence of an insurance policy is not enough. How do you affirm that the insurance policy will respond to a loss event as represented by the borrower’s documentation?
  • You are you exposed to the vicarious liabilities that will arise out of your interest in the assets of the borrower? An example is the October 26, 2005 New York jury ruling that the Port Authority was negligent in the bombing of the World Trade Center in 1993 — an attack that killed six people and wounded 1,000. The jury ruled that the Port Authority, the agency that owned the WTC, was negligent by not properly maintaining the parking garage where terrorists detonated more than a half-ton of explosives.
  • Coinsurance Issues? LIMITS ARE NOT ENOUGH. Are you aware that even though the limit insured may exceed the value of your collateral, this may not be fully collectible if the borrower has not purchased limits that meet the coinsurance requirements in their property policy?
  • That in 80% of our reviews the lender is not properly named on their borrower’s policy? Sometimes the correct borrower is not properly named on the insurance policy.
  • If your staff truly understand insurance? Are they experts? Why not use outside expert risk analysts (consultants) who have experience with national and global insurance programs? Outside insurance experts will help the lender keep up with the complexity and constantly changing nature of the insurance markets. Insurance markets and lenders’expectations change over time as the business world becomes aware of new risks or the magnitude of older risks previously thought insignificant (i.e. pollution, terrorism and toxic mold).
  • A. M. Best ratings — is your borrower’s insurance carrier financially strong? Post 9/11 and the economic downturn that resulted, we saw many insurance carriers fail. While the insurance market has stabilized, constant monitoring is still required.
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