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Insurance and Risk Management
ConvergentRisk Insurance Agency LLC (“CRIA”) provides Risk Management and Insurance solutions to the commercial real estate industry as well as varied business operations. As risk management consultants, we provide our clients with the most professional, knowledgeable, and trustworthy solutions and services possible.
By using our vast understanding of the real estate industry, our varied backgrounds, experience and our unique market perspectives, we deliver a comprehensive range of insurance services that cover:
- Property and casualty insurance review and recommendation of coverage placement.
- An informed understanding of CMBS, conduit, government lenders, and various other platforms’ insurance loan requirements.
- Deep experience across multiple disciplines allows us to quickly assess, analyze, market, and serve our clients’ best interests.
- Analysis and development of policy recommendations for distressed real estate, as well as analysis of insurance requirements for performing real estate portfolios.
- Review and analysis of policy provisions, advocacy, and oversight.
- Due diligence for new clients with respect to eligibility under master, blended or dedicated insurance programs.
- Evaluation of client compliance with lender insurance documentation.
Catastrophic Flooding Loss
Evaluating coverage for a loan assumption, saving our client over $250,000…
- One of the largest special servicers engaged our team to evaluate coverage for a loan assumption. The collateral consisted of five retail locations exposed to hurricane and flood risks. The buyer stated that their master insurance program was fully compliant with the loan documents as evidenced in the insurance certificates.
- In the evaluation process, we pressed for complete policies and exposure information, ultimately revealing that flood coverage was provided by a “shared” policy covering hundreds of locations and billions of dollars in exposure which all encompassed the same limit.
- Further, the insurance certificates failed to disclose the reduced overall flood limit for coverage in the 100-year flood zone and, rather, indicated only the limit for non-critical flood zones, which was many multiples of the critical flood limit.
Process and Challenges
- We worked with the client to develop other options to bring the coverage into compliance while keeping costs in check.
- Our team recommended that a dedicated difference in limits (”DIL”) policy be obtained in favor of the five locations; if a catastrophic flood occurred and the shared limits were exhausted, the DIL would be in place to protect the collateral. Since a DIL policy is often far less expensive for a borrower than a dedicated stand-alone policy, the asset would benefit from a lower debt service coverage ratio when compared to other properties similarly situated.
- As fate would have it, two months after the assumption closed, major regional flooding occurred which completely exhausted the master policy’s critical flood limit.
- However, as a DIL policy was in place, the loan remained compliant and at a cost that was nearly $250K lower than what it would have been had dedicated primary policies been obtained for the five retail malls. Given the devastation that is known to result from hurricane associated storm surge and river flooding, loan collateral is at risk of having no coverage if other properties access shared insurance coverage.
Real Estate Portfolio Analysis
Assessing a portfolio acquisition and recommending solutions to save our client $500,000 annually…
- A leading national commercial multifamily lender/servicer engaged ConvergentRisk’s risk management group to assess a portfolio acquisition of over 2,000 commercial multifamily loans.
- Our charge was threefold:
- Assess the current level of insurance loan compliance.
- Quantify the magnitude of catastrophic casualty risk to the firm from the perils of flood, earthquake, and hurricane.
- Recommend solutions in the form of retention, transfer, or avoidance.
- Operating under tight time constraints, a risk modeling team was assembled and performed a compliance audit of current loans in the pool.
- Detailed data was captured and digitized to build a state-of-the-art probabilistic computer model. This allowed the team to assess the geographic distribution of assets and to quantify likely loss outcomes that could occur due to a major earthquake, flood, or hurricane.
- Our team’s report to management identified a number of areas that presented compliance risks to the buyer, allowing the buyer to negotiate substantially less stringent compliance obligations, as well as a loss escrow for the pool from the seller, significantly reducing the execution risk as well as saving the buyer hundreds of thousands of dollars annually in servicing expenses from the lower compliance burden.
- In addition, the catastrophic analysis identified previously unknown proximity aggregation and loss sensitivity risk adding negotiating leverage due to potential loss from an earthquake event (both to the collateral and buyer’s balance sheet, as much of the loss would have been non-recourse).
- As a direct result of ConvergentRisk’s analysis, significantly more favorable terms were negotiated, which reduced the potential net mortgage impairment cost to the buyer by up to $500,000 annually.
George T. O'Neil III
CA License No. 0H85180
ChFC, CPCU, ARM, CRM, CIC
President – ConvergentRisk Insurance Agency
781.707.9449 | [email protected]
Mr. O’Neil serves as President of ConvergentRisk Insurance Agency. He has over 40 years of experience in a broad range of commercial risk management and insurance operations including mergers and acquisitions and management of the underwriting divisions of some of the world’s most respected insurers.
Mr. O’Neil holds a Master of Science in Management from Salve Regina University and a Bachelor of Science degree in Insurance from the University of Rhode Island. He also holds the Chartered Financial Consultant (ChFC), Certified Risk Manager (CRM), Chartered Property Casualty Underwriter (CPCU) and Associate in Risk Management (ARM) industry designations, as well as Property & Casualty Consulting and producer licences.
Mr. O’Neil is a member of the Mortgage Bankers Association, Executive Insurance Roundtable and serves as a guest speaker at industry events.