Joseph Fobert
July 2014
The U.S. commercial real estate market continues to face a range of risk management challenges as a result of shifts in the financial market. The rapidly changing environment has led to high turnover in real estate portfolios and controlled capital expenditure budgets as companies seek cost reductions in an effort to improve their competitive position. As the market returns to more normal conditions, risk management considerations that had been put aside are once again coming to the forefront. Liability claims have been increasing in both frequency and severity, which may lead to higher deductibles and self-insured retentions and more restrictive terms and conditions.
Some risks have become greater, while others are emerging. For instance, New York’s Scaffold Law continues to present significant challenges with more awards reaching into the millions of dollars. Meanwhile, many owners of residential real estate properties may have to deal with completed operations and construction defect exposures that may not have been priority concerns in the past. Some firms may face heightened liability risks stemming from reductions to capital improvement and operational expenditures. Emerging exposures include the requirements of the Americans with Disabilities Act, the push for energy efficient buildings and increased awareness of indoor air quality problems. To mitigate their exposures and the potential costs associated with them, companies need to reinforce their risk management efforts, develop strategies to address both the new and familiar exposures and review their primary and excess coverage.