How real estate firms use insurance as a business tool

23 May 2016

As the market remains soft, legal indemnities and merger and acquisition insurance products are becoming more widely used by real estate companies.

The real estate insurance market continues to follow the general market cycle of reducing rates and increasing capacity among existing providers, with new entrants looking like maintaining this trend.

Pressures around the level of premium recovered from occupiers continues apace, with an expanding roster of consultants providing advice and benchmarking to the tenant community. Our experience in this regard continues to confirm that premiums charged are price-competitive for an extensive basis of coverage.

Although no major losses have occurred in the sector in the last year, if attritional losses continue as they have begun, insurers will again struggle to generate any significant underwriting profits across their book in 2016.

Business tool

Across our client base we continue to see the use of insurance as a business tool rather than just protection of assets. The legal indemnities products available, in particular ‘Right to Light’, are now becoming the norm rather than the occasional purchase and are helping to facilitate transactions and development projects. 

We are seeing more and more traction on these products and requests by lenders pre drawdown. As well as legal indemnities, M&A insurance products are also being widely used to smooth SPV and company acquisitions, both as warranty and indemnity wraps and tax liability protection, especially on managed funds coming to the end of their investment life.

Tip for buyers

Companies should continue to mitigate the risks as far as reasonably possible, working with their chosen broker and insurer through agreed risk management strategies to ensure they continue to secure the widest possible coverage at the most competitive price. 

For more information, please contact Nigel Todd, Head of European Real Estate on +44 20 7558 3549 or email nigel_todd@jltgroup.com

contact Nigel Todd
Head of European Real Estate