Experts say insurers are increasingly looking at the age and condition of roofs on commercial buildings and imposing more restrictive conditions on property policies.
Commercial buildings with older roofs that have not been updated and those located in regions prone to windstorms, severe convection storms and wildfires see insurance coverage for roof damage limited by the provisions of the policy, they say.
And coverage restrictions have accelerated following numerous named windstorms, tornadoes and hail events in recent years, according to multiple brokers.
Properties in South Florida’s tri-county region, including Broward, Miami-Dade and Palm Beach counties, see the most restrictive roof coverage in policies, said Jeff Buyze, national head of real estate practices. based in Fort Lauderdale, Florida with USI Insurance Services. LLC.
The changes include covering older roofs based on actual depreciated cash value rather than replacement cost, Mr. Buyze said. Initially, this applied to roofs over 15 years old, but insurers are now limiting payouts to the actual cash value of buildings with roofs as young as five years old, he said.
The definition of roof covering has also expanded to include roof decking, so any damage to the decking falls under the roof covering citation, he said.
“Imagine a 10,000 square foot commercial building. … The delta between replacement cost and actual cash value is quite often huge. You could be talking hundreds of thousands of dollars,” Mr. Buyze said.
Occupancy classes that see more restrictive roof terms include residential accounts and businesses of public entities, particularly municipalities and school districts, said Peter Fallon, national head of real estate practices at brokerage Risk Strategies. Co. Inc. in Boston.
“It’s those accounts where…they just haven’t invested any money in maintenance to make sure their roofs can withstand hail and wind damage, so underwriters say, ‘We’re going to have to do something,'” Mr. Fallon said.
Stricter roof conditions have an impact on allowed and unallowed risks, he said. “We’re seeing that in the standard market as well,” he said.
The changes tend to depend on the age of the roof, especially those over 15 years old, Fallon said. When coverage applies based on actual cash value, insurers may also impose a surcharge and a higher deductible, he said. Insurers can also add component deductibles to reflect additional exposure such as water damage, he said.
Careful consideration of underwriting based on roofing materials is a priority in areas prone to windstorms, hail and wildfires, said Michael Korn, global head of real estate and marine at EPIC Insurance Brokers in San Francisco.
In the event of a wildfire, underwriters fear embers could travel miles from a wildfire and land on a combustible roof and start a fire in a different area, Korn said.
Many building roofs in California are constructed of wood or shingles, he said.
Appraisals are rising to help cover rising roof costs and to ensure buildings are insured at an adequate value, said Randy Doss, Houston-based principal broker at CRC Insurance Services Inc.
“Let’s say the standard five years ago was $65 per square foot for frame buildings. These days they cost up to $100 or $110 a square foot for frame buildings to kind of offset some of those roofing costs,” Doss said.
Variations in building codes in different states and issues with roofing contractors in some states could also affect available terms, he said.
Overall values have become a focal point for the market, especially on rooftops in high-risk areas that are subject to the vagaries of wind, rain and water damage, said Henry Daar, executive vice president based in Chicago and responsible for real estate claims at Willis. Towers Watson PLC.
“Carriers don’t want to pay for the same thing twice or thrice,” Daar said.
In the case of a roof that has already suffered losses but has not been repaired, insurers will exclude coverage for pre-existing unrepaired damage or limit what they cover to a percentage of the damage, it said. he declares.
Other clauses limit the amount insurers will pay for so-called cosmetic damage to a roof – for example if a hailstorm results in vomit marks but it is not determined that it caused a loss structural integrity, he said.
Roof claims can be expensive and based on roof composition and building structure, ranging from a loss of $25,000 to a loss of $5 million, Daar said.