A building completed little more than a decade ago should, most organisations assume, cost roughly the same to rebuild. When Kroll recently conducted a reinstatement valuation of one such facility, the rebuild cost came in 40% to 50% higher than the original construction price.
"That often comes as a surprise," said Matthew Wright, who leads Fixed Asset Advisory Services for Kroll across the UK, Netherlands and Germany. "A construction cost that was very well negotiated over a certain period of time can be very different from what it would actually cost to rebuild after a loss."
Speaking to Insurance Business UK at AIRMIC 2026 in Birmingham, Wright and Mike Matthews, commercial director for EMEA at Artex Risk Solutions, described two sides of the same problem. Organisations often overestimate what they know about both the assets they are insuring and the protection they have in place. The result is an exposure that frequently only becomes visible after a loss.
For Wright, the problem often starts with the information organisations hold about their own assets.
Finance teams understand assets from a balance sheet perspective. Facilities and engineering teams understand what is physically on site. Insurance programmes are often built using a different set of assumptions altogether.
"We often find that those various different parts of an organisation aren't very well linked," he said. "For us, it is about trying to bring those functions together so that organisations understand what they have and what the replacement cost value of those assets should be."
Inflation and supply chain disruption have made that disconnect significantly more expensive. Wright pointed to transformers that once took three or four months to source but, during the post-Covid disruption, stretched to as long as three years. While lead times have improved, replacement costs and supply chain pressures remain well above pre-pandemic norms.
The result is that organisations relying on historic asset values may be significantly more underinsured than they realise. A detailed asset review often surfaces another issue: asset concentration. Organisations frequently discover that much of their insured value sits within a single part of a facility, while the insurance programme has been designed around a total-loss scenario.
Understanding what a partial loss would actually cost, and whether the programme would respond – is a question many organisations have yet to ask.
Matthews approaches the same issue from the insurance programme itself.
"Organisations retain most risks through deductibles and policy excesses, often self-insuring without fully understanding or properly financing these exposures," he said.
Gap analysis between a client's risk register and insurance programme frequently uncovers exposures that have gradually migrated back onto the balance sheet. Sometimes that reflects changing insurer appetite. Sometimes organisations have simply failed to keep pace with how their own risk profile has evolved.
Cyber is one example. As cover has increasingly moved into standalone policies, sub-limits and exclusions have become more common, leaving organisations carrying what Matthews describes as "naive" or "innocent" capacity: self-insurance created by default rather than by design.
Covid exposed another weakness. Organisations found that losses spanning multiple policy lines often failed to fit neatly within programmes designed around individual risks.
"Traditional policies often don't respond to interconnected risks," Matthews said. "That has driven organisations to reconsider their risk financing approach beyond siloed policies."
For Wright, the answer begins with understanding what assets an organisation actually has and what it would cost to replace them today. Regular valuations, he argues, should be viewed as a strategic exercise rather than a compliance requirement.
Matthews said organisations typically rethink their approach when one of three things changes: cost, coverage or control. Rising premiums, restricted cover or reduced limits, and a lack of meaningful involvement in claims settlements are all signals that the existing structure may no longer be fit for purpose.
Where gaps are identified, captives and cell structures can provide a route to financing those risks outside the balance sheet. One misconception Matthews regularly encounters is that captives are only suited to short-tail property risks. In practice, casualty business is often a strong fit because claims are typically paid seven to nine years after reserves are established, allowing investment returns to accumulate before claims are settled.
Different questions, but the same conclusion. Organisations cannot make informed decisions about risk financing until they understand both the assets they own and the risks they are retaining. Too often, those gaps only become visible when a claim puts long-held assumptions to the test.
