Upgrading Properties for Improved Windstorm Insurance Coverage


Windstorm property damage and resulting insurance coverage issues have been increasing beginning with Hurricane Andrew in 1992 and continuing to the present.  Insurers have increased deductibles, coverage and premiums to try to balance their risk.  Each new storm event has the potential to throw the windstorm market into disarray.  As a result, stable property insurance from quality carriers has become hard to come by and expensive.

The best situation properties can be in for property insurance is referred to by the industry as Highly Protected Risk (HPR).   This means they are able to comply with strict insurance company guidelines where they are rated as the best risk.  HPR compliant properties are not expected to have large losses following a hurricane event and also expected to open for business soon after a storm.  Accordingly, HPR properties are normally afforded lower deductibles and premiums than non-compliant properties.

Typically, in order to gain HPR status, a property must meet or exceed current building code requirements for structural integrity including exterior building enclosure elements such as glazing, cladding and roofing.  Most properties that were constructed prior to 2000 do not meet HRP requirements and, surprisingly, many newer properties do not comply either.

Non-compliant properties can be upgraded to meet HPR status.  The cost and ultimate savings vary from property to property.  Real dollar savings can come not only from reduced insurance costs, but also from energy savings with more efficient systems. Intangible savings include: better occupant comfort, refreshed appearance, outside noise reduction, better safety and security, and the ability to remain in service after a storm.

There are recent examples of properties where the return on investment (ROI) had a short return period.  They included a large ultra-luxury hotel where the existing glass throughout the property and several roofs were replaced.  The ROI payback was about five years with insurance and energy savings.  In addition, the insurance deductible was reduced from 15 million dollars to under 1 million dollars.  Another example was at a large golf clubhouse where non-compliant synthetic stucco (EIFS) was reinforced and upgraded.  The ROI was one year.

Obviously savings are not this easy to achieve at all properties.  However, there are candidate properties where similar savings may be found.  To determine if a particular property is a candidate for HPR upgrades, a feasibility study must be conducted to identify what systems are currently in place and if they are HPR compliant.  For any systems that are not HPR compliant, upgrade options can be developed along with a cost estimate.  Insurance, energy and any other savings can then be calculated and ROI determined.

For properties with a favorable ROI, there can be many compelling reasons to upgrade and modernize the exterior building enclosure.  GCI can assist with feasibility studies, along with the design of upgrades and construction administration.