![\"Mark](\"https:\/\/www.yardi.com\/blog\/wp-content\/uploads\/sites\/15\/2015\/08\/MarkMascia.jpg\")
What type of risk are you or your company most concerned about insuring against today?<\/strong><\/p>\n Mark Mascia:<\/strong> Cap rate expansion outpacing rental growth. The market has seen phenomenal growth in rents with limited new supply to slow it down. However now that cap rates are at historically low levels throughout most markets in the country there isn\u2019t a whole lot of room for them to go anywhere but up. So as cap rates expand lowering the value of their property they need to keep increasing rents just to stay even on values. For longer-term cash flow owners this isn\u2019t as much of a concern, but for REITS with mark to market pricing and for companies who had short-term business plans this is a real risk to their investments.<\/p>\n Heidi A. Much:<\/strong> For Village Green, we\u2019re trying to get our arms around our cyber exposure. We all use a multitude of providers in our industry\u2014someone who does your accounting data, your rider insurance, your employee screening\u2014and while we don\u2019t necessarily have confidential information stored, we are using providers who have that information stored. We\u2019re trying to understand what\u2019s out there, what are they doing, what is their disaster plan and recovery plan?<\/p>\n Steve Heimler:<\/strong> Number one is a data breach. Everyone is a target, and we do have information in the hands of a special leasing agent who has access to all the data of an entire property. It\u2019s a low-level employee who goes rogue on you, that\u2019s who we are worried about.<\/p>\n How do you deal with the challenges of insuring against this risk?<\/strong><\/p>\n Mascia:<\/strong> The best bet is to choose a long view on the investment and structure your debt to take advantage of low rates locked for long periods of time. If your costs are locked on the debt side, and demand for apartments stays high (which they should) the change in value short term due to cap rates won\u2019t hurt you. Who cares about the value of the asset on a day-to-day basis? It is more about the cash return you locked in for the long haul.<\/p>\n Much:<\/strong> Our motto is to be proactive. Insurance is one vehicle to handle a risk but there are a lot of other ways contractually to manage risk that I think are much more effective. We really look at our contracts and what we hold people responsible for and what insurance they carry to provide the financial backing for what we hold them responsible for. Many companies are taking a holistic approach to risk, so we\u2019re looking at it across the entire enterprise.<\/p>\n Heimler:<\/strong> We have developed a protocol and some policies designed around minimizing the access to information, such as making authorities and permissions limited, depending on the position within the organizations.<\/p>\n As an insurance company working with multifamily developments, what do you find apartment companies are most concerned about insuring against today?<\/strong><\/p>\n Steven W Sachs:<\/strong> It all depends on who you are, what class of asset you have and where you\u2019re located. If you have a lot of CAT exposures (e.g. Florida, California) and you have wind, earthquake, flood and to some extent hail, your property costs are more significant and those are a larger concern. From a liability standpoint, underwriters are really looking at crime exposure and are now doing zip code analysis on every area, and there\u2019s stricter liability for the property owner. Cyber is another that is coming up much more.<\/p>\n Michael Stern:<\/strong> The obvious catastrophic exposure for rental properties is uncontrollable natural disasters such as hurricanes, earthquakes, flood, hail and tornadoes.\u00a0However, these are risks that insurance companies feel they are able to quantify and price through various risk modeling tools and spread of risk.\u00a0The risk that is harder to quantify is rooted in the occupants that inhabit the rental properties.\u00a0These \u201cresident sponsored events\u201d can manifest themselves in a variety of ways but many times create damage to the owner\u2019s property through perils such as fire, smoke, explosion or sewer backup.\u00a0These can be small nuisance claims or completely destroy a building.<\/p>\n This damage is the responsibility of the resident but many times they have no financial ability to pay and do not have adequate insurance.\u00a0These attritional losses can create significant financial harm inside an owner\u2019s property insurance deductible (because many times multifamily operators carry larger deductibles) and drive up premiums over time. Sachs:<\/strong> From our perspective, it\u2019s being an advisor to a client and not just selling them insurance. It\u2019s balance sheet protection so whether it\u2019s cyber or environmental, you\u2019d be surprised how many multifamily owners don\u2019t buy that and feel they are immune. It\u2019s why you buy umbrella insurance, and it\u2019s why you should strongly buy both environmental and cyber, and if you really don\u2019t think it can happen to you, then buy it with a high retention.<\/p>\n![\"Heidi](\"https:\/\/www.yardi.com\/blog\/wp-content\/uploads\/sites\/15\/2015\/08\/HeidiMuch-150x150.jpg\")
![\"Steve](\"https:\/\/www.yardi.com\/blog\/wp-content\/uploads\/sites\/15\/2015\/08\/SteveHeimler-150x150.jpg\")
![\"Steven](\"https:\/\/www.yardi.com\/blog\/wp-content\/uploads\/sites\/15\/2015\/08\/StevenSachs-150x150.jpg\")
\nMHN: How do you deal with the challenges of insuring against this risk?<\/p>\n![\"Michael](\"https:\/\/www.yardi.com\/blog\/wp-content\/uploads\/sites\/15\/2015\/08\/MichaelStern-150x150.jpg\")