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

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