Introduction
In recent times, the insurance market, including commercial real estate (CRE) property insurance, has experienced significant turbulence. With rising property values, natural catastrophes, and other factors contributing to increased premiums, RV park owners and buyers are grappling with the challenges of securing cost-effective insurance coverage. This whitepaper aims to provide a comprehensive overview of the current state of the insurance market, drawing from responses shared by RV park owners and additional information sourced online.
Background
A few weeks ago, an email and THIS article were shared with over 300 property RV park investors. The article highlighted an 18.3% rise in CRE property insurance premiums during the first half of 2023. This increase was largely attributed to multiple severe thunderstorms, resulting in insured losses of approximately $34 billion in the United States alone. I received dozens of responses and consolidated those down into the following whitepaper:
Insights from RV Park Owners
1. RV Parks vs. Other CRE Properties
One notable observation from RV park owners is that RV parks have been less affected by insurance premium spikes compared to other types of CRE properties. This is largely attributed to the nature of RV parks, which typically consist of concrete pads and primarily require income replacement insurance.
2. Challenges in Obtaining Insurance
Owners shared challenges in securing insurance coverage for RV parks:
Limited Carrier Options: Insurance carriers are increasingly cautious about underwriting RV parks, with some carriers even reducing their capacity in this space.
Extended Quote Timelines: Obtaining insurance quotes for RV parks has become a time-consuming process, often taking 4 to 6 weeks.
Variable Pricing: Pricing for RV park insurance can vary significantly, with some owners experiencing premiums double or more compared to existing policies.
Business Income Replacement: When underwriting RV parks, it's common for insurers to consider the addition of business income replacement, further increasing costs.
3. Banking Requirements
Owners noted that banking requirements play a significant role in insurance costs. Banks often impose strict insurance requirements, which can limit the options available to RV park owners. Finding a bank with more flexible requirements may result in better insurance rates.
Strategies for RV Park Owners
Shop Around: RV park owners should consider working with experienced insurance agents who can shop the policy to multiple carriers. This approach can help identify competitive rates and coverage options.
Build Trust with Agents: Building a trusting relationship with insurance agents is crucial. Trustworthy agents are more likely to go the extra mile to find suitable coverage at favorable rates.
Self-Evaluation: Owners should evaluate their RV park's unique characteristics, such as management experience and customer reviews, to present a compelling case to insurers.
Additional Considerations
Workers' Compensation: Exploring options for workers' compensation insurance can also contribute to overall cost savings.
Reinsurance: The availability of reinsurance support has a direct impact on commercial property capacity. Understanding the reinsurance market dynamics can provide insights into insurance availability and pricing.
Conclusion
In today's insurance market, RV park owners and buyers face unique challenges, but there are strategies to mitigate rising insurance costs. It's essential to understand the specific factors affecting RV park insurance, such as business income replacement and banking requirements. By leveraging experienced insurance agents, building trust, and exploring alternative coverage options, RV park owners can navigate the insurance landscape more effectively.
While there is no one-size-fits-all solution, this whitepaper aims to provide valuable insights and strategies to help RV park owners make informed decisions in securing insurance coverage that meets their needs in a challenging insurance environment.
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