Buildings Revaluations

26th November 2017

Buildings Revaluations
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

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