In October 2017, the sky was falling. Armageddon was just around the corner and death and destruction was on the tip of every tongue. Industry sectors were battling with the immense ramifications of three major hurricanes making US landfall within three weeks.
Catastrophe losses were significant – economic and insured – but some were hit harder than others. In the real estate & hospitality sector, those who were honest about the true value of their assets had more of a safety cushion against the devastation, explained Alexandra Glickman, managing director of Real Estate & Hospitality, Gallagher.
“There are organisations worldwide – big risk management accounts and small ones – who are not reporting adequate values to their insurance broker or carrier,” Glickman told Insurance Business at RIMS 2018. “When a client reports having a $150 million hotel but then suffers $350 million worth of damage during a catastrophe – there’s a real disconnect.
“At Gallagher, we talk to our clients very seriously about the importance of being honest when reporting asset values. It’s about placing greater emphasis on the ethical natural and the voracity of the information being provided.”
Last year was a rude awakening for many, especially for those with assets in North America, about the devastation nature can bring. Several years of benign natural catastrophe activity in the US left many prey to ‘cultural short-term memory’ syndrome, and some bought blanket insurance limits with the mindset of ‘what could simply go wrong?’
If 2017 proved anything, it’s that catastrophe events happen, and at quite the cost. Hurricanes Harvey, Irma and Maria caused up to $220 billion in economic damage (according to Impact Forecasting). Mexico was rocked by a 7.1 magnitude earthquake, South Asia suffered some of its worst monsoon flooding in years, and parts of California spent the majority of the fall up in flames.
It’s critical for real estate owners and hospitality clients to be honest about the value of their assets because we can never be entirely sure when disaster will strike, according to Glickman.
“Underwriters are not just looking at spreadsheets anymore. More and more US markets are taking a page out of the book of the London markets, who are actually underwriting the management of the ownership,” she added. “This has been going on for decades in the London market, and the US market is now starting to recognise the value in that approach. After all, just because a client is big, it doesn’t necessarily mean they’re telling you the truth.”