Insight

Arranging the best protection for a real estate investment or construction project is something you simply cannot afford to get wrong

16 July 2024
Insight

Arranging the best protection for a real estate investment or construction project is something you simply cannot afford to get wrong

We have extensive experience in providing deal specific solutions alongside traditional insurance placement to make sure you get the deal done.

For funders we will:

  • Review borrowers’ existing insurance arrangements in relation to lenders contractual / facility agreement requirements.
  • Give advice on and coordination of required amendments to cover to ensure both parties remain aligned, and that the necessary insurance cover is in place and within the required timescales and pricing.
  • Conduct mid-term amendments and annual renewal reviews to ensure borrowers policy cover remains in place and is compliant with Lenders’ requirements.
  • Provide bespoke insurance cover solutions for funding / financier firms.

For investors we will:

  • Conduct Insurance due diligence reporting services to provide a clear line of sight on risk transfer and enable the successful completion of an acquisition or investment.
  • Negotiate with the insurance market to ensure the very best value is derived in respect of the cover requirements for the property or portfolio being purchased.
  • Revisit financier and legal requirements and conclude policy cover accordingly for all interested parties in readiness to proceed with cover.
  • Use our access to transactional insurances to help the deal get done and ensure a successful sale/exit.

For property developers, we will:

  • Ensure our insurance due diligence includes design, planning, and legal aspects of the project, and co-ordination with all parties as required.
  • Engage with the insurance market for proposed terms and premium, including annual, single project and owner-controlled insurance programmes.
  • Provide project-specific insurances including directors and officers liability, warranty & indemnity and environmental liability.
  • Provide cover for specialist risks such as latent defects, surety and bonds and legal indemnities.

But why is insurance due diligence so important for property investors and developers?

In simple terms the process is absolutely key to identifying and mitigating risk and avoiding an adverse financial impact:

Uncovering Hidden Liabilities: Insurance due diligence helps identify potential risks and liabilities that may not be immediately apparent. This includes gaps in coverage, exclusions, and limits that could expose the investment to unexpected losses.

Assessment of Existing Policies: Evaluating the target/portfolio company’s current insurance policies ensures they are adequate and appropriately structured. This assessment can reveal if the company is underinsured or overpaying for coverage.

Enhanced Risk Management: By identifying potential risks, Investors can develop strategies to mitigate these risks.

Valuation Accuracy: Proper insurance due diligence ensures that all potential liabilities are accounted for, leading to a more accurate valuation of the target/portfolio company. This prevents overpayment and enhances return on investment.

Cost Savings: Identifying redundant or overpriced insurance policies can lead to significant cost savings.

Further benefits include:

Compliance and Regulatory Assurance: Ensuring the target/portfolio company complies with all relevant insurance regulations and standards reduces the risk of regulatory penalties and associated costs.

Improved Operational Resilience: Identifying and addressing operational risks through appropriate insurance coverage can enhance the target company’s resilience, ensuring smoother business operations and reducing downtime.

Industry-Specific Insights: Tailored insurance due diligence can address specific concerns relevant to the industry in which the target company operates, ensuring a comprehensive risk management approach.

What about Post Deal and at Exit?

Post-Deal Insurance Optimization: Post-acquisition, Investors can leverage their purchasing power to negotiate better insurance terms and premiums for the portfolio company.

Strategic Risk Management: Implementing a strategic approach to risk management post-acquisition can lead to operational efficiencies, cost savings, and an overall stronger, more resilient business.

Enhanced Exit Value: A well-insured company with robust risk management practices is more attractive to future buyers, potentially increasing the exit value of the investment.

What is our experience and has our work added value?

We have worked on more than 500 M&A deals in the last ten years.

PE firms that have incorporated thorough insurance due diligence often report smoother transactions and fewer post-deal disputes. They tend to achieve better financial performance from their investments due to reduced unforeseen losses and trouble-free exits.

Insurance due diligence provides a deeper understanding of the target company’s risk profile, reduces costs, helps shape successful investments, and contributes to value creation both pre- and post-acquisition. By integrating insurance due diligence into their investment strategy, you can achieve more secure and profitable outcomes.

Vista

We are an award winning independent, management owned and fiercely ambitious insurance brokerage, ready for your business. Our goal is to provide absolute reassurance for our clients in the construction and real estate sectors, including funders,  financiers and investors.  Pre-empting your challenges, protecting your investments, assets and shielding you from risk, now and for the future.

To find out more about how Vista can help, get in touch with our Director of Sales at mark.t@vistainsurance.co.uk or give us a call us on 0161 393 7111.