It’s just over halfway through 2021, and a quick review of the past seven months shows the emerging pattern for the year may be found in its lack of pattern: that is, it’s a year in flux. So far, it’s been a rollercoaster ride for those of us in the property risk management industry. Hurricanes, fires, rioting, flooding, drought, ground subsidence and building collapse have all made a major appearance in the risk management field and across media headlines. In fact, it’s been so tumultuous, in May, forecasters at Colorado State University increased their expected totals for the number of named storms and hurricanes in 2021, above the normal yearly average. NOAA currently cites the total estimated cost of damage from weather and climate disasters for January 2021 through June of the same year at an estimated $28.8 billion.
We’re also experiencing the continuing aftershocks of COVID-19 and its effect on business — particularly in construction and property valuations. Supply chains have been disrupted and cost for materials in certain areas have skyrocketed, making it difficult for some organizations to know how to estimate replacement and reproduction costs and, in turn, property value.
To manage it all, it may seem like you need to plan for the unimaginable. But there still are some ways you can gain greater stability in a dramatically fluctuating world.
Focus on Controlling the Property Risk Elements You Can
With so many climate issues and pandemic supply chain problems striking in such a short time, it may feel like the security and value of your property portfolio is completely at the mercy of unpredictable outside forces. But the truth is, there are many elements of property risk management you can employ to protect and improve the property you have and ensure better risk outcomes. These include increasing the thoroughness and accuracy of your property data, updating your valuations and making preventative, risk-reducing property enhancements. Here’s a little more about each…
Get That Property Data in Order
Having the right property data on hand when the unthinkable strikes can be key to making life less stressful at the worst of times. Convective storm modeling and catastrophe modeling (CAT modeling) can help predict your property’s level of risk during severe thunderstorms, hurricanes and other natural disasters. But to gain these benefits, you’ll need the right property data types to run through their risk simulators. The data for this task varies, depending on the catastrophe modeling option you choose (such as RMS or AIR Worldwide). But even if you don’t decide to leverage convective storm or CAT modeling to better predict your risk outcomes, simply having easily accessible and complete property data ready for your insurer is still a great idea. Not only is necessary for your SOV, giving you greater credibility with insurers/reinsurers, it can save time and aggravation right when you need it most — those difficult times when you’re already dealing with property damage and loss. You’ll soon discover, a little forethought goes a very long way.
Ensure You Have a Knowledgeable Valuation Partner to Support Your Organization
With the COVID-19 pandemic came manufacturing delays, shipping backlogs and an increase in materials costs. According to Fortune.com, as of June 2021, for instance, lumber had risen 288% from 2020 due to an unexpected post-pandemic demand for new construction and DIY home improvements. So this begs the question: how do you pin down accurate values for your properties when so much is in flux? Additionally, should you add inflationary factors to the cost of materials or not?
At AssetWorks, we noticed that Marshall & Swift’s current cost multipliers show Class C Section 15 buildings alone had a +11% trend from January 2020 to June 2021. Broad fluctuations like these are why our experts never really recommend applying inflationary factors to your values over trending, because of how quickly those values can become skewed over time.
What’s important to keep in mind is that a trusted valuation partner, who keeps up-to-date on industry trends, can help you work through these challenges. Whether you need a fresh, on-site valuation or you’re between valuations and want to trend values forward, your property appraisal experts should be able to answer questions and resolve issues regarding market volatilities for both the short- and long-term. It’s their job, as your partner, to become a powerful resource to you, ensuring you have the right coverage when you need it. Your valuation firm should be available to answer your questions both during valuation time and between projects, as a part of their service to you.
Don’t Wait for Property Damage; Focus on Damage Prevention
Another way to help reduce risk in a risk-prone climate is to turn your attention to needed property upgrades, particularly if you’re in a flood, fire, tornado or hurricane zone. Leveraging your property data, check the age and type of architectural features, to verify they will withstand today’s risks. For example, if windstorms have increased in your area, check the age of your roofs and determine whether they’re due for replacement. Verify the type of doors and windows you have, and whether they could be replaced with more storm-secure ones. In an area where wildfires pose a threat, consider your sprinkler systems and other fire-preventative elements and whether they require a change or upgrade. By looking at your property with an eye for potential damage, you can make the changes now that support better risk outcomes in the future.
You’ve Got This.
With strong, useful property data, an eye for upgrades, and property valuation expertise on your side, you and your properties don’t need to be tossed and turned upside down by the next big risk event. You can still take charge of key areas in your property risk program and move forward with the right coverage, no matter what comes your way.