Becoming hurricane resilient: Tips for advising multifamily property owners

With the 2023 Atlantic hurricane season now underway, insurance agents must focus on increasing multifamily property clients’ resiliency in the face of these natural catastrophes. As storms become more frequent, damaging and costly, taking steps to become hurricane resilient will help property owners better mitigate risks and safeguard investments.

Last fall, Hurricane Ian brought catastrophic storm surge and intense winds to the southwest coast of Florida, becoming the third-costliest hurricane in U.S. history. Overall losses from the storm totaled more than $100 billion, of which approximately $60 billion were insured, according to Munich RE.

Over the months since Hurricane Ian devastated areas of Florida, a backed-up supply chain coupled with a claims process complicated by the level of both wind and flood damage from the storm are slowing property repairs. Many properties still show the scars of the storm and even now, some communities remain without power or water.

With the after-effects of last year’s hurricane season still lingering, the 2023 hurricane season is now underway. Researchers are predicting an above-average season with 18 named storms and nine hurricanes – four of which are forecast to become major hurricanes.

As another uncertain hurricane season is underway, agents must take steps to help multifamily property owners become more hurricane resilient by developing a restoration game plan. This will ensure that resources are available to cover rising rates and begin repairs quickly. Agents must talk with their clients so they can better understand and mitigate risk.

Develop a restoration game plan

After a storm hits, property owners scramble to identify contractors to help repair the damage, and demand for the services of these contractors quickly outstrips their availability. Agents must guide property owners through developing a restoration game plan that includes identifying reliable, trustworthy restoration contractors and taking the time to establish and maintain relationships with necessary contractors. This can get repairs moving more quickly and minimize overall disruption.

Agents must advise multifamily property owners to meet with contractors virtually or face-to-face ahead of storm season to discuss potential needs arising from storm damage. During these meetings, property owners should ask questions about the current cost of labor and materials and what deposits are required, verify the contractor’s licenses and insurance, and ask for references.

Having clients form a relationship with contractors before storms hit can eliminate the post-storm scramble for contractors who are sure to be in short supply.

Ensure resources are available

Agents must direct multifamily property owners to assess resources to ensure they can cover the cost of increasing property insurance premiums and get repairs jumpstarted as claims work their way through the process.

It’s a harsh reality that property insurance rates are skyrocketing. A 2023 State of Multifamily Risk Survey and Report released by the National Multifamily Housing Council found that property insurance costs are on the rise, “leading policyholders to raise deductibles and insurers to limit coverage amounts and include new policy limitations.” The survey found that, in the past three years, 61% of respondents had to increase their deductibles to maintain affordability and 34% reported that their insurance carriers limited or reduced coverage amounts.

Along with earmarking resources to cover the cost of increasing property insurance premiums and higher deductibles, multifamily property owners should be advised to have resources available to begin repairs and remediation as the claims process plays out.

When a hurricane hits, it takes time for insurance claims to be settled. In Florida, for example, after an insurer receives notice of an initial, reopened or supplemental property insurance claim from a policyholder, the insurer has 90 days to pay or deny the claim or a portion of the claim.

The repair process might require funds for an engineering report that details what needs to be done to bring the building back up to code and back in full operation. Complying with recommendations contained in this report can be a lengthy and costly process.

Explain the risks of hurricanes

Before a storm threatens, agents should talk to their clients to review their insurance policies and make sure their coverage is up to date. Having these conversations to review insurance coverage across their portfolio of properties helps owners gain a better understanding of their risk exposure, deductibles and any limitations relating to water and wind damage.

Agents can advise property owners on risks and develop policies to ensure these risk exposures are covered.

With hurricane season underway, now is the time for agents with multifamily property clients in hurricane-prone areas to assess exposures and prepare for what might come. Using these preparation tips to increase hurricane resiliency can help agents better mitigate clients’ risks and safeguard investments.

Ali Pool is vice president at the Insurance Office of America. She may be contacted at [email protected].

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