They Could Have Used a Captive Insurance Company: Commercial Real Estate Companies Hit by Hurricane Matthew
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As the news story below shows, natural disasters like Hurricane Matthew can cause a tremendous amount of damage. When events like this occur, large insurers are more likely to challenge claims. Remember – even though you’ve contracted with them for a particular service, they’re also a for profit company. For them, an aggressive claims practice could shave millions off payouts.
Commercial real estate (CRE) companies can limit this problem by forming a captive insurance company that underwrites a deductible reimbursement policy for a third-party property policy. For example, the CRE company keeps its third party coverage, but adds a $500,000 deductible which is then covered by the captive. Conceptually, this turns the third-party policy into excess coverage. This structure gives the captive parent complete control of the claims process, minimizing claims processing paperwork and returning the parent company to normal operations faster.
From the Street.com
At least 100,000 insurance claims stermming from damage inflicted by Hurricane Matthew are anticipated to be filed with payouts expected to exceed $7.5 billion, reported by the Consumer Federation of America.
Damage from wind is forecast to lead the claim list, despite the number of homes that experienced flooding, especially in North Carolina.
"Families will have to dig deeper into their pockets because insurers have been steadily increasing hurricane wind coverage deductibles and imposing other policy limitations," said J. Robert Hunter, director of insurance for CFA and former federal insurance administrator and Texas insurance commissioner in a statement
"This liability shift to consumers may take some by surprise, since disclosures are often buried in renewal paperwork that consumers may not understand or even read," he added. "Because so many consumers experienced claims problems in the wake of Hurricanes Katrina and Superstorm Sandy, we urge homeowners dealing with losses caused by Hurricane Matthew to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement."