When it comes to property insurance today, bigger can be better.Community agents, with the proper underwriting support, can take onrisk analysis and insuring of properties with policy loss limitsranging from $3 to $100 million. Steady growth in these types ofaccounts has, in fact, led to the forming of special large-propertyunderwriting units with nationwide reach.

Contrary to common misconceptions, many of these potentialcoverages are not as risky as they first might seem. Affiliatedagents are enjoying the rewards of increasing their annual premiumrevenues, as well as the practice growth that comes from thesuccessful handling of larger accounts.

Take a Good Look Around

While the large property market may seem like unfamiliar oruncomfortable territory for many agents — both psychologically andphysically — several economic development and industry trends areproviding this excellent opportunity. Let's consider some typicallarge property classes, ones that managing general agents arewriting with community agents on a regular basis.

This class includes many conventional properties, where theissue is basically one of scale. Examples include small hotels,shopping centers, smaller engineering design facilities ormanufacturing plants, nursing homes and assisted living facilities,daycare facilities, owner-occupied churches, and recreationalfacilities such as skating rinks or bowling alleys.

Consider “value creep.” Solid, well-located assets mayappreciate themselves into the large property category. At the sametime, new construction, with modern-day building costs, quality,and amenities means that even modestly sized facilities, such as astrip shopping center or a prototyping shop, often will cross that$3 million replacement cost/loss potential threshold.

Mature urban areas experiencing revitalization also present manyopportunities in this property class. Examples include abandonedcommercial buildings that have been converted to residential loftsor retail stores, thus creating new value, entertainment venues,smaller industrial parks, or health-care facilities.

Here, the insurance industry has a valuable role to play inurban renewal. We help secure the social integrity and commercialviabilities of smaller downtowns, mature suburbs, or “old” citiesby completing the all-important economic development triumvirate ofenvironmental remediation, financing, and insurance. Vacantproperties awaiting redevelopment also belong in this largeproperty class.

At the same time, continued geographic expansion for developmentacross the United States is creating a whole new environment ofrisk for large property.

Urban Sprawl

Consider the good old days when large properties were confinedto downtowns or discrete zoning districts in a denser urban area.But now, even a rather small town might have a large factory orindustrial plant, as companies are attracted to greenfield andlower cost sites that are undeveloped and free of environmentalissues.

A major example is the journey that the automotive “transplant”original equipment manufacturers made to the American heartlandsand, now, the Southeast and Deep South. Other industries havefollowed suit.

However, these can be tough risks to place in the conventionalmarketplace. Many of these very rural areas are located intownships, where even the closest municipality might not have afire department. Lack of public response — or time for publicresponse — becomes an important issue, as in the case of a largeproperty coverage recently written for a rural cheese factory inWisconsin.

Recreational, educational, and other businesses may involvesimilar issues. Wineries, small farms that produce specialty fruitsand vegetables, art centers located in vacation retreats, spas, andnew-age lifestyle centers are examples of properties that may fallin the large property category while being located far off thebeaten path, requiring specialist underwriting skills.

Cultural trends are relevant to follow here. For example, aswine drinking has grown more popular, more wineries are springingup. Likewise, with people looking for more recreation activitiesthat don't involve “roughing it,” resort-like dude ranches, locatedin rural settings far from municipal fire departments, are becomingmore popular.

Welcoming Real Challenges

These days it is not uncommon to see novelty coverages, such asthose for a resort on the top of a mountain or for the watertreatment retention dam for a large Rocky Mountains municipality.This is an area where an agent can team up with a wholesaler whohas access to multiple underwriters, including those on a globalscale, and can take on large property limits. Such a wholesaleralso should have binding authority, including with Lloyd's ofLondon, which will enable it to make decisions and commitments inquick order, often in the same day. This is extremely important inthe large property arena and will help the community agent competewith much larger broker entities.

Look around. What are the new businesses in your community? Areproperties being converted to new, higher-value uses? What localbusinesses are experiencing robust growth? Is a chain of specialtygrocery markets or other businesses adding locations?

Why Now?

Many of these underwriting opportunities have become availablebecause of the current upheaval in the large broker universe. As inmany other industries, the mega-players are consolidating lines ofbusiness and concentrating on the highest-value (premium) accounts,leaving even the $3- to $25-million properties to the middle marketand community agents who have the necessary wholesaleralliances.

In other cases, national brokers don't want to take the time todo the extra homework, to dig deeper and develop ways to mitigatepotential or existing “turn-off” exposures.

Getting Creative

There are many creative approaches available to structure largeproperty coverages, satisfying underwriters and getting yourclients the insurance they need. Examples include:

Multiple sourcing. Even when facing coverage limits due to aproperty's protection class, such risks can be handled by multiplesourcing — having a team of underwriters each take on only aportion of risk. Premium level also has a place in thisequation.

Temporarily writing out objections. How can an insurer and agentteam up to provide property coverage for an owner-occupiedcondominium complex that no one else will write? Recently, in justsuch a case, water heaters were constantly breaking down withattendant water damage. To simply write out that loss categorywhile the association took care of the necessary repairs was aneasy way to place that coverage.

Write over existing coverage. Excess and surplus lines marketparticipants have the ability to write just a layer of coverageover existing primary coverages, or the reverse.

This includes intelligent use of the E&S marketplace.Because of the requisite high limits, this class can often fall tothe E&S market. Also, the property's location and type of useoften present the necessary risks to push this class of businessfrom the standard carriers to the E&S markets.

In reality, many, if not most, of the large property situationsan agent will deal with are not substandard risks by any means:portfolios of strip centers and other retail properties, vacantland, R&D facilities, and nursing homes. The issue often issimply one of aggregate scale and the current disinterest ofnational mega-brokers in writing these coverages.

As a result, many agents are writing large property coverage forthe first time, and doing so with great success.

David J. Price serves as executive vice president, chiefunderwriting officer, and Laura Gibson, ACII, is senior underwriterfor Burns & Wilcox, North America's largest independently ownedmanaging general insurance agent. They can be reached [email protected] and [email protected].