Buildings Revaluations
26th November 2017
![Buildings Revaluations](/img/870/322/2017-11-27-v4YtDU.jpg)
With the costs of rebuilding rising at an alarming rate, regular property insurance valuations are vital to avoid the consequences of underinsurance in the event of a claim. EIG have partnered with independent risk management specialists, Cardinus, to provide this service.
The impact of underinsurance
How do properties become underinsured?
What is a professional insurance valuation?
About Cardinus
Underinsurance can affect property asset and portfolio owners in a number of ways:
- Claims payment does not cover the full property repair/rebuild cost
- Funds may not be available to complete the rebuild
- Increased borrowing may be required
- Negative impact on balance sheet
- Complex negotiations with insurers
- Dispossessed leaseholders and tenants
- Extended rebuild period
- Exposure to potential legal action for inadequate levels of cover from lenders and leaseholders
- Brand and reputational damage
Did you know that many properties in the UK are undervalued by as much as 60%?
How do properties become underinsured?
- Developers reinstatement costs are used rather than true reinstatement value
- No professional valuation carried out in the last three years or prior
- Figures based on notional/market value instead of reinstatement costs
- Incorrect estimation based on historical figures
- No allowance for fluctuating cost of raw materials and labour
- Relying on inaccurate developer’s costs that do not factor in demolition, architect, local authority requirements and other costs
What is a professional insurance valuation?
- These are commonly known as Reinstatement Cost Assessments or RCA’s
- It is a professional assessment of the total property rebuilding costs
- It includes an onsite valuation of the property and peripheral features
- An RCA takes into account:
- unusually shaped buildings
- unusual locations
- unusual buildings
- buildings with unusual fixtures and fittings
- using unusual building materials
- demolition costs and professional fees
- Vat costs where appropriate
The standard practice is to carry out Reinstatement Cost Assessments every 3-5 years, often with intervening annual desktop assessments to ensure 100% protection.
Benefits to the property asset owner- Conducting an RCA regularly ensures that that the property is adequately protected
- Allows property to be insured on ‘agreed value’ basis, no ‘averaging’
- May reduce premium rates as a result of increases in property values
- May improve borrowing facilities based upon increased asset values
- In many cases costs are borne by the leaseholders through the service charge
- Balance sheet protection – minimise risk gap
About Cardinus
- Established over 20 years
- Independent from EIG
- Building Insurance Valuation specialists
- Over 5000 valuations, surveys and assessments carried out each year
- A UK wide network of professionally trained surveyors and consultants
- ISO 27001 and 9001 certification