A recent Law360 piece gathered expert opinions on trends in real estate insurance. Quoting leading legal and insurance experts, the article explores the potential for a government-backed pandemic recovery solution, and outlines the reasons why pandemics are not privately insurable:
- A pandemic impacts all lines of insurance at once. "'Unlike terrorism, which is typically limited to specific assets or areas, a pandemic shuts down everybody at the same time,' said Alexandra Glickman, senior managing director and global real estate and hospitality practice leader at global consulting firm Gallagher."
- The magnitude of the loss of a pandemic makes it difficult to underwrite. "'First, you have to understand the magnitude of what you're underwriting. The risk assessment is so much greater in a pandemic than in a terrorism case,' said Morris Missry, managing partner of Wachtel Missry LLP and the chair of the firm's real estate department. 'In a terrorism case, you're talking about something that's finite. ... In a pandemic, it's not just one site or a few sites. In a pandemic, you're talking about cities, states. The magnitude of the loss is so much greater.'"
- Without government support, the risk-adjusted deductible for a pandemic insurance policy would be prohibitively expensive. Paraphrasing Mike Liever, partner at Orrick Herrington & Sutcliffe LLP, the piece notes: "Liever said if a policy were to, say, offer $2 million in coverage but come with a $1 million deductible, that might not be terribly attractive to an owner. Insurance companies may also put time deductibles into plans, which could, for example, spell out that a particular event is not covered for the first six months."
Read the full article here.