Insurance Due Diligence and Review
Protecting your exposure
Protection! Protection! Protection!
While not putting onerous insurance requirements on a borrower, the proper coverage will strengthen a loan officer’s underwriting file by providing confidence that: (1) your borrower has proper coverage to help them remain a Going Concern
in the event of a covered insurance claim; and (2) the lender’s rights are protected.
Illusion of Protection
An over-reliance on Certificates of Insurance can leave portfolios unnecessarily exposed to the risk of borrowers having insufficient insurance to remain a going concern in the event of an incident, accident or disaster. Certificates of Insurance do not reveal all the exclusions, limitations and endorsements that might leave a borrower without full coverage and unable to fulfill their obligations on their loan. Key issues not revealed by Certificates of Insurance:
- Lender properly listed
- Lender properly notified of changes
- Changes in building code
- Realistic deductibles
- Flood, Windstorm and Hail exclusions
Business frequently look to save money by reducing coverage or changing insurance carriers or brokers. Additionally, oversights may occur on the part of a broker that impacts the terms of coverage. Yet these changes are not always properly communicated to policy holders or lenders even though they may impact the business’s ability to remain a going concern – and repay the loan – in the event of a major incident. Certificates of Insurance often provide an illusion of protection that is not always true.
The Three-Step Process
RI Risk Management Services offers a three-step process that enables lending institutions to protect themselves from unnecessary risk to their loan portfolios – raising the curtain on the illusion of protection.
1. Customized Loan Requirements
We help to customize loan insurance requirements for each commercial borrower. Every borrower has its own unique business operation and potential exposure to loss. We identify those exposures and the insurance required to eliminate them.
2. Due Diligence Review
We review the borrower’s policies to ensure they meet the insurance requirements identified in step #1 and conform to the requirements of the loan. Insurance Certificates alone do not provide all the facts or policy limitations and exclusions that can result in a borrower’s policy not conforming to your customized loan requirements, leaving your institution exposed.
After ensuring the borrower is properly covered and able to fulfill their loan obligations in the event of an incident, we work with them and their insurance professional/broker throughout the year to ensure renewal policies or replacement policies continue to meet loan requirements. This three-step process can uncover exposure to lending portfolios never seen by in-house personnel.
Three Steps to Security
RI Risk Management Services provides lending institutions with the industry knowledge and expertise to achieve a maximum level of security for lending portfolios by uncovering exposure in insurance coverage of borrowers and potential borrowers. Our industry experts have nearly 100 years experience in property and casualty insurance and the knowledge to find loopholes of exposure that can threaten a business’s ability to remain a going concern following an incident.
Call us at (973) 588-4167 to learn more or to arrange an appointment to determine how we can help your lending institution reduce unnecessary exposure to your portfolio.