This class includes many conventional properties, where the issue is basically one of scale. Examples include small hotels, shopping centers, smaller engineering design facilities or manufacturing plants, nursing homes and assisted living facilities, daycare facilities, owner-occupied churches, and recreational facilities such as skating rinks or bowling alleys.

Consider “value creep.” Solid, well-located assets may appreciate themselves into the large property category. At the same time, new construction, with modern-day building costs, quality, and amenities means that even modestly sized facilities, such as a strip shopping center or a prototyping shop, often will cross that $3 million replacement cost/loss potential threshold.

Mature urban areas experiencing revitalization also present many opportunities in this property class. Examples include abandoned commercial buildings that have been converted to residential lofts or retail stores, thus creating new value, entertainment venues, smaller industrial parks, or health-care facilities.

Here, the insurance industry has a valuable role to play in urban renewal. We help secure the social integrity and commercial viabilities of smaller downtowns, mature suburbs, or “old” cities by completing the all-important economic development triumvirate of environmental remediation, financing, and insurance. Vacant properties awaiting redevelopment also belong in this large property class.

At the same time, continued geographic expansion for development across the United States is creating a whole new environment of risk for large property.

Urban Sprawl

Consider the good old days when large properties were confined to downtowns or discrete zoning districts in a denser urban area. But now, even a rather small town might have a large factory or industrial plant, as companies are attracted to greenfield and lower cost sites that are undeveloped and free of environmental issues.

A major example is the journey that the automotive “transplant” original equipment manufacturers made to the American heartlands and, now, the Southeast and Deep South. Other industries have followed suit.

However, these can be tough risks to place in the conventional marketplace. Many of these very rural areas are located in townships, where even the closest municipality might not have a fire department. Lack of public response — or time for public response — becomes an important issue, as in the case of a large property coverage recently written for a rural cheese factory in Wisconsin.

Recreational, educational, and other businesses may involve similar issues. Wineries, small farms that produce specialty fruits and vegetables, art centers located in vacation retreats, spas, and new-age lifestyle centers are examples of properties that may fall in the large property category while being located far off the beaten path, requiring specialist underwriting skills.

Cultural trends are relevant to follow here. For example, as wine drinking has grown more popular, more wineries are springing up. Likewise, with people looking for more recreation activities that don't involve “roughing it,” resort-like dude ranches, located in rural settings far from municipal fire departments, are becoming more popular.

Welcoming Real Challenges

These days it is not uncommon to see novelty coverages, such as those for a resort on the top of a mountain or for the water treatment retention dam for a large Rocky Mountains municipality. This is an area where an agent can team up with a wholesaler who has access to multiple underwriters, including those on a global scale, and can take on large property limits. Such a wholesaler also should have binding authority, including with Lloyd's of London, which will enable it to make decisions and commitments in quick order, often in the same day. This is extremely important in the large property arena and will help the community agent compete with much larger broker entities.

Look around. What are the new businesses in your community? Are properties being converted to new, higher-value uses? What local businesses are experiencing robust growth? Is a chain of specialty grocery markets or other businesses adding locations?

Why Now?

Many of these underwriting opportunities have become available because of the current upheaval in the large broker universe. As in many other industries, the mega-players are consolidating lines of business and concentrating on the highest-value (premium) accounts, leaving even the $3- to $25-million properties to the middle market and community agents who have the necessary wholesaler alliances.

In other cases, national brokers don't want to take the time to do the extra homework, to dig deeper and develop ways to mitigate potential or existing “turn-off” exposures.

Getting Creative

There are many creative approaches available to structure large property coverages, satisfying underwriters and getting your clients the insurance they need. Examples include:

Multiple sourcing. Even when facing coverage limits due to a property's protection class, such risks can be handled by multiple sourcing — having a team of underwriters each take on only a portion of risk. Premium level also has a place in this equation.

Temporarily writing out objections. How can an insurer and agent team up to provide property coverage for an owner-occupied condominium complex that no one else will write? Recently, in just such a case, water heaters were constantly breaking down with attendant water damage. To simply write out that loss category while the association took care of the necessary repairs was an easy way to place that coverage.

Write over existing coverage. Excess and surplus lines market participants have the ability to write just a layer of coverage over existing primary coverages, or the reverse.

This includes intelligent use of the E&S marketplace. Because of the requisite high limits, this class can often fall to the E&S market. Also, the property's location and type of use often present the necessary risks to push this class of business from the standard carriers to the E&S markets.

In reality, many, if not most, of the large property situations an agent will deal with are not substandard risks by any means: portfolios of strip centers and other retail properties, vacant land, R&D facilities, and nursing homes. The issue often is simply one of aggregate scale and the current disinterest of national mega-brokers in writing these coverages.

As a result, many agents are writing large property coverage for the first time, and doing so with great success.

David J. Price serves as executive vice president, chief underwriting officer, and Laura Gibson, ACII, is senior underwriter for Burns & Wilcox, North America's largest independently owned managing general insurance agent. They can be reached at [email protected] and [email protected].