Insurance Uncertainty No Laughing Matter
Getting back to work, I recently read this paper about the insurance fallout associated with the August 14th blackout, which was recently published by Marsh & McLennan. I recommend it to any organization currently assessing their insurance coverage as well as their general state of preparedness for such an event. It presents a useful overview of the insurance nuances that need to be considered. The paper points out that the number of blackout-related claims filed has been low, as many businesses are still waiting to find out the cause of the blackout. Indeed, most claims will not be able to be addressed until a precise cause is pinpointed, and even after this is determined, the question of who should be compensated will be addressed on a case by case basis -- the issues are quite mind-boggling. That paper is timely not only because of the blackout, but also because the insurance industry today finds itself at a crossroads.
Set against this backdrop, today we are releasing an abstract and multimedia presentation of our fourth paper: The Rippling Effects of Insurance Uncertainty on Commercial Real Estate. The thesis of our paper is that events over the past two years have thrown a wrench into the way insurance policies are written, and this has a direct effect on occupancy costs. Although the Bush Administration signed TRIA into law in late 2002 that provides the industry some relief, it is only a temporary measure.
Ultimately, insurance uncertainty is another area that contributes to a movement toward decentralization. The complexity of what does or does not constitute the basis for a claim, and how this in turn is affecting occupancy trends in the future, makes this a very important area for us to focus on. Given the complexity of the prevailing insurance environment in the new normal, Warner Brothers' stampede of elephants seems to be a fair metaphor for what might be a risk.