Connect to Real Estate

Unless a property company can show that it really does focus on risk management, it's probably going to start paying more for its insurance. Underwriters want to see that the business has a strategy for preventing losses - that it knows how to do it, has systems and manuals, and gets reports and acts on them. If your claims record is poor, be prepared to get tough questions.

When it comes to risks, it's not just the big fire or flood that insurers are concerned about, though they certainly haven't forgotten about them. They also want to know that attrition losses (meaning the more common, smaller events that erode the premium), are under control. Some of these, like malicious damage or maintenance related items, could well be on the upswing because of the economic climate.

John Searing, Head of Risk at JLT's Real Estate practice, speaks at a recent seminar about the risk issues facing real estate investors. Click here to watch now.

If the insurance market gets tougher, it may be possible to save money on premiums, because when competition is strong as it has been, underwriters add bells and whistles to attempt to differentiate themselves, and they may give limits that the client didn't even think they needed. A thorough review with your broker can probably highlight some areas which aren't essential.

At the same time, cutting back on insurance means more losses end up in the lap of the company. So the argument that I put to the 100+ property investors and specialists gathered at an event we organised last week  is that risk management today is more important than ever - to control the cost of insurance and reduce the hit to the company's own cash flow. Depend on the lucky rabbit's foot if you like, but remember what it did for the rabbit.