Capture all necessary information on client locations for underwriting specifications, including all addresses, number of buildings at given locations, construction, occupancy, protection and exposure details. Check the use of each building (warehouse, manufacturing facility, retail, etc.), fire protection, and available water supply. Report values for buildings, contents, inventory, machinery and equipment, business interruption and other key exposures. For properties located in catastrophe-prone areas, consider utilizing RMS or AIR catastrophe modeling software. Insurers will be inputting the data into their models so individual measurements can be useful predictors.

Read related: “Q&A: Karen Clark Discusses Cat Management as Hurricane Season Arrives.”

In arranging coverage, be sure to understand the basis of valuation for each asset. Is it replacement cost, actual cash value or selling price? Match the property insurance policy wordings accordingly. Compare any publicly available information to the schedules in the policy, note any discrepancies and discuss them with the client. This is especially critical if the policy contains coinsurance provisions or margin clauses.

If the client is involved in manufacturing or distribution, note any and all interdependencies among various facilities. Does the client manufacture at one location and transport products to another site for distribution? Assess any potential exposures, especially those involving time element issues. These are becoming challenging for underwriters in light of the substantial losses last year from Thailand and Japan.

Here are some items to include on your checklist:

• Know the client's key suppliers and customers and their locations to ensure that the policy territory encompasses all geographies. Today, all time element exposures require careful attention; many insurers are limiting these coverages in light of recent losses.
• Review the client's contractual obligations. Are there union contracts that require the client to pay employees for a specified time period regardless of the client's ability to operate and continue their employment? Then match the insurance coverage to the contract requirements.
• Check any lending agreements and related insurance requirements. Also, be aware of landlord or tenant relationships and corresponding insurance responsibilities. When there's a tenant, who is responsible for the insurance?
• To assess business interruption exposures you need a complete understanding of the clients' various operations, products, services and different revenue streams. Consider expenses associated with each operation and walk through loss scenarios with the client to determine expenses that will and will not continue if a loss occurs.
• Understand ordinary payroll obligations, skill level of key employees, the job market in areas surrounding each location, and the client's expectations regarding keeping its employees onsite in the event of a loss.
• Check the client's business continuity plan (BCP) and assess how each operation plans to mitigate a potential loss.

Use all of this information to help clients make decisions about their insurance program, business continuity plans and supply chain. Keep in mind, however, that this is not a one-time task, but a process that should be repeated every year. Schedules must be updated around the annual renewal strategy and more frequently as needed.

Read related: “Customization Is Key in Writing Small-Business Policies.”

Regularly discuss with your client any changes in their business plan, including acquisitions, divestitures, and plans for expansion or joint ventures. Most importantly, as always, be sure to document everything in writing.

Pre-Planning for Cat Losses

Begin pre-planning for a potential cat loss by reviewing the property insurance policy with the client and members of the broker team. Make sure everyone knows what's in the policy then move forward with the following steps:

• Set up a claims team in advance of any potential event. Work with the client to interview different experts ahead of time. That will help everyone think through the process and set the protocols before a loss.
• If possible, identify a claims adjuster that is agreeable to all parties and have them written into the policy. This is especially important if there are multiple property insurers on a program.
• Help clients develop procedures and protocols for the business units so they can refer to them in the immediate aftermath of a loss.
• Use the value collection process every year to educate the client on property damage and business interruption coverages so they understand what's in their policy.
• Review all client locations in catastrophe-prone areas. This will help you and the client assess the adequacy of limits and make any necessary deductible calculations.
• Understand deductibles and how they work. The policy might have a straight dollar deductible, percentage deductible or aggregate deductible. With a percentage deductible, know the values subject to the percentage. Are they reported values or actual values? Will the deductible be applied separately to buildings, contents and business interruption? If there is a waiting period of 24 hours, is that one day or three 8-hour shifts? Make sure everyone understands how deductibles will be calculated in the event of a catastrophic loss.
• Review the business continuity and loss mitigation plans and ask if updates are needed.
• Communicate the property policy obligations and opportunities. Each policy has provisions in the wording that your client needs to understand. There are policy provisions to get advance payments in the event of a loss. Be sure claims preparation fees are included.
• Understand timing requirements for reporting a loss. Is it 30 days, 60 days? If there is coinsurance or a margin clause, make sure the client understands where that is, what it means and how it will apply in a loss.
• Document any exclusions or onerous conditions. There may be definitions for flood that delineate where the flood exclusions or other provisions apply. Document the covered property and the covered perils.

Next week: Tackling a Cat Claim.