The Chubb insurance firm said it is warning real estate companies they need to take a variety of steps to protect themselves against growing risks as their inventory of vacant properties increases during the economic downturn.

Tim Ehrhart, vice president, Chubb & Son, and real estate market manager, Chubb Commercial Insurance, said, "Vacant buildings are particularly vulnerable to risk because of the absence of people performing day-to-day activities that mitigate common hazards."

He said owners of vacant real estate can reduce risk by:

o Notifying their insurance company and checking policy terms and conditions applicable to vacant property.

o Advising local authorities of vacated buildings.

o Removing unnecessary materials and combustibles from the premises.

o Informing local fire departments of remaining materials that could impede fire-fighting.

o Inspecting facilities weekly or hiring a guard service for daily drive-by observations.

Despite dropping values for commercial real estate, Chubb advised that building owners should think twice before they reduce the scope and amount of insurance to help offset lost revenues.

"While property owners may think this a time to reduce their limits of insurance and save money, the reality is that the cost to repair or replace lost or damaged property has not decreased, and therefore, reducing limits could leave property owners underinsured and exposed to catastrophic losses," said Michael Chang, senior vice president, Chubb & Son, and real estate market manager, Chubb Specialty Insurance.

Chubb noted that beyond property hazards, vacant buildings present dangers to the public and building owners face potential liability exposures from those who are injured or become victims of crime at their properties.

The company warned that owners should heed safety and maintenance advice to help protect themselves from the array of property exposures vacant buildings present.

Chubb noted that firms facing increasing commercial space vacancies must cope with the challenges of reducing increased exposure to losses caused by physical damage to their property and third-party liability claims while they search for new tenants.

The insurer noted that studies by the National Fire Protection Association show an average of 14,900 fires a year occur in vacant buildings, causing upward of $118 million annually in direct property damage.

In addition, Chubb said, theft, vandalism, water, collapse and wind losses figure prominently in increasing real estates firms' loss costs.

Chubb mentioned that office building vacancy rates exceed 10 percent in most U.S. cities, and that number is expected to rise to 16.7 percent this year.

Special Reports /

Rising Commercial Vacancies Means Higher Risk, Chubb Says

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