Estimated Read Time: 2 minutes 45 seconds
Commercial property owners face a number of risks which have the potential to severely disrupt both them and their tenants. We take a closer look at some of the most significant risks and how they can be managed effectively.
Escape of water
Insurers pay out approximately £930 million[i] in water-related claims each year and, while other commercial property claims have declined in recent years, escape of water claims have been steadily rising, according to data from the Association of British Insurers (ABI[ii]).
Escape of water, whether it’s caused by frozen or blocked pipes or improper maintenance, can have significant consequences. As well as causing damage to ceilings, walls, floors and building contents, it can lead to subsidence damage if water disrupts property foundations and result in business interruption and loss of rent or income during repairs.
Carrying out regular inspections on pipework, checking for drips and other signs of leaks and using tech like leak warning devices and remote meter reading can help property owners reduce the risk of water damage.
Tenant risk
Tenants could arguably be considered one of the biggest risk factors for property owners. If they don’t take care of the property properly or break rules concerning its usage, they can cause significant damage.
Having a robust process for finding and vetting tenants is vital to reducing risk, as is making regular inspections and keeping on top of maintenance.
Flooding
Extreme weather events are on the rise and in many areas of the UK flooding is a very real problem for property owners, which could leave their property untenable for long periods if the worst happens.
Loss of income following a flood is a huge concern for commercial landlords. Rent payments may be delayed or even stop for a few months depending on the severity of the damage, so it’s advisable that property owners have sufficient insurance in place to cover this loss of income. There’s also the possibility that the property may not be badly damaged, but tenants’ stock or equipment is, meaning they have to temporarily or permanently shut up shop. In this case, rent guarantee insurance will protect property owners if tenants default on the lease agreement.
Fire
Fire is one of the most expensive property insurance claims, with £1.3 billion[iii] being paid out to customers during 2018, according to the ABI.
There are several steps property owners can take to reduce their risk exposure to fire, including ensuring all the correct safety equipment is fitted and tested regularly.
It’s also important to conduct regular fire risk assessments and make sure that adequate safety measures are in place. The risk assessment needs to identify any possible causes of fire, substances within the building that would burn and any people who may be at risk.
Tips for managing commercial property risk
- Keep on top of property maintenance and improvements
Keeping to a maintenance schedule and regularly inspecting the building and making necessary updates can help landlords spot and address potential hazards before they do any damage.
- Have procedures in place
Businesses ideally need to have a specific risk management procedure in place for a variety of scenarios, including all those outlined above. Plans should be documented, communicated thoroughly and updated regularly.
- Choose the right insurance
Property owners need to have the right cover in place for the specific risks that they face. Our team of in-house risk surveyors can help your clients manage and reduce their business risks. The information they provide can also allow underwriters to tailor cover and terms appropriately for the level of risk present. For more information on how our team of in-house risk surveyors can help your clients, speak to your usual NIG contact.
[i] https://www.leaksafe.com/
[ii] https://nig.com/trading-support/news/your-guide-to-escape-of-water-full-article/
[iii] https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/home-insurance/fire/