WASHINGTON, DC - The cost to insure apartments rose slightly in 2011, the first time in four years, according to the National Multi Housing Council’s annual Apartment Cost of Risk Survey (ACORS). The Survey, which is based on data covering 750,000 units operated by 57 apartment firms, shows the average (nonweighted) Total Cost of Risk (TCR) rising 1% between 2010 and 2011. By comparison, last year’s report show a 6% decline in the TCR. (Total Cost of Risk reflects the cost of the three principal components of insurance premiums: property, general liability and workers’ compensation.)
A 25% increase in workers’ compensation rates was one of the main factors behind 2011’s higher TCR, although higher premiums were also recorded for general liability coverage.
“Our results indicate that the buyers’ market enjoyed by apartment firms in recent years is reversing,” said Jeanne McGlynn Delgado, NMHC’s Vice President of Business and Risk Management Policy. “Although this year’s increases were small and limited to a couple of lines of insurance, we expect to see moderate price increases in 2012 as a result of both the current investment market and the impact of severe weather in 2011.”
Key findings of NMHC’s ACORS survey:
The mean average property cost of risk, which accounts for 70% of the average apartment firm’s insurance budget, decreased by 1% in 2011.
The mean average commercial general liability cost of risk increased by 9%, from $37 per insured unit in 2010 to $40 in 2011.
Premiums for workers’ compensation increased from $833 per full-time employee in 2010 to $1,040.
62% of apartment firms require residents to have renters’ insurance with the most common limit required at $100,000.
About the Survey
The ACORS contains information about property, general liability, umbrella, workers compensation, D & O, professional liability, employment practices and environmental insurance lines. Data were analyzed by Conning Research and Consulting for NMHC and the survey includes Conning’s proprietary Property-Casualty industry forecast data and trends to add context to the survey’s findings. Fifty-seven firms responded, supplying cost data for insurance procurement for more than 750,000 apartment units.
Firms that completed the survey can receive the full data sets, along with the report. Non-participating NMHC members can download an executive summary and a PowerPoint summarizing the results on the NMHC Website.
Based in Washington, DC, NMHC is a national association representing the interests of the larger and most prominent apartment firms in the U.S. NMHC's members are the principal officers of firms engaged in all aspects of the apartment industry, including owners, developers, managers and financiers. One-third of Americans rent their housing, and over 14 percent live in a rental apartment.