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4 Effective Strategies to Mitigate Your Risk of a Commercial Property Claim

Written by Erik Bohn on

The commercial property insurance landscape has always been dynamic, but it’s even more so today. Rates have risen for the past 24 quarters and early estimates indicate this trend will continue, with rate increases expected to average in the high single digits or low double digits in 2024. Meanwhile, risks like severe weather and crime are surging, especially in certain regions, and inflation is increasing claim costs.

In this environment, it’s critical to improve your commercial property risk profile and reduce your odds of a loss. You’ll face fewer challenges in obtaining sufficient coverage, and though rates are generally rising you’re likely to see a lower impact on your premiums. It’s also less likely your insurer will refuse to renew your policy or require you to make significant updates with little notice. And of course, avoiding claims reduces your out-of-pocket costs.

How can you mitigate the risk of a commercial property loss? These four strategies provide a great start.

1. Invest in Risk Detection and Loss Prevention Measures

Thanks to advances in technology and building materials, there are many methods for detecting potential problems and preventing losses on your commercial property. The most appropriate measures will depend on your building type, location, and occupancy.

  • If your property is in a high-crime area or you own/operate retail locations (which are grappling with an unprecedented surge in theft), it’s prudent to invest in sophisticated security systems, like advanced surveillance systems and anti-theft mechanisms.
  • For older buildings and any location that you don’t occupy yourself full-time, add a water detection system to ensure you’re alerted to water problems as soon as possible. Water damage is one of the leading causes of property claims and it can originate from many sources, including roof leaks, burst pipes, sprinkler system malfunctions, toilet leaks, and hot water heater failures.
  • In areas prone to wildfires, use noncombustible materials for signage, siding, and other exterior elements, and add non-combustible mesh screens to vents to reduce the risk of embers getting inside. If you’re renovating or building a commercial facility in these areas, consult with your contractor about the use of building materials that are non-combustible or flame-resistant where possible.

2. Keep Current on Maintenance and Repairs

Keeping your commercial property in good condition and following a documented maintenance schedule will reduce your risk of a claim and demonstrate to your carrier that you’re committed to loss prevention. It helps to follow a detailed checklist when conducting periodic reviews of the property, both inside and out, so you’re always aware of issues that need attention.

Outside, your checklist might include ensuring that snow and ice are removed thoroughly and promptly, ADA-required ramps are clearly marked and in good condition, and all signage is visible, for example. Inside, be sure to check for signs of water leaks or moisture to keep mold or fungus from developing and reduce the risk of health problems for building occupants. These are just a few of the many items that should be on your maintenance checklist. And once you’ve identified a potential problem, it’s important to make the necessary repair or replacement right away.

3. Develop Risk Mitigation and Response Plans 

Your business continuity plan should include detailed procedures on how to respond to various events that could result in a loss, along with instructions on how to prepare for events that you have advance knowledge of (like hurricanes). Include clear, thorough standard operating procedures (SOPs) for the risks your building occupants are most likely to encounter based on the facility’s location. These might include flooding, fire, wildfires, hurricanes, tornadoes, or blizzards.  

While a cyberattack would be covered under a cybersecurity policy, not a general property policy, it’s equally important to develop a detailed response plan in the event a cybercriminal attacks your business. Since it’s a sudden event that happens without warning, it’s prudent to develop and communicate a plan that outlines action steps and responsibilities.

4. Conduct a Risk Assessment

The term “risk assessment” can mean different things and involve varied levels of depth and sophistication. Some commercial property owners have an in-house risk manager or other professional who takes the lead on assessing the facility’s risk. Others lean on their independent insurance advisor for guidance or hire a consultant that specializes in risk assessments. Some businesses employ sophisticated techniques like risk mapping to create a visual measure of risk priorities based on a combination of frequency and severity.

Regardless of the approach you take, conducting some level of risk assessment periodically will help you understand your exposure and guide you on where to focus to reduce the odds of a costly claim. Additionally, if you’re thinking about purchasing another commercial property or you’re in discussions to acquire or merge with a company, your due diligence should include a through property risk assessment.

Turn to the B. F. Saul Experts for Guidance! 

The advisors at B. F. Saul Insurance have worked with countless commercial property owners, investors, asset managers, and developers, helping to identify risks and obtain the best coverage to address them. Whether you own or operate office buildings, apartment buildings, retail establishments, or other commercial facilities, we can ensure you have the right coverage for your needs and recommend ways to reduce your rates and minimize losses. 

Contact a B. F. Saul Insurance commercial property insurance advisor to learn how we can help!

Thinking about buying commercial property? Download our guide for a detailed checklist of considerations to keep in mind. 

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Authored by Erik Bohn

As a Vice President & Commercial Producer at B. F. Saul Insurance, Erik Bohn specializes in business insurance for the commercial real estate, non-profit, and professional services industries. He specializes in commercial real estate insurance lines, including large and complex property schedules, general and excess liability, and builder’s risk and wrap insurance programs (OCIP & CCIP).

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