Insurance Requirements in Commercial Real Estate Lending: Complying With Lender Standards Under New Market Realities

This CLE course will provide real estate counsel with an understanding of the various components of property insurance and the current requirements of lenders concerning each type of coverage. The panel will explore the new market realities of obtaining various types of coverage and provide guidance for borrowers and lenders negotiating, drafting, and modifying insurance terms for existing and new loans.

Evaluation of property insurance is a complex undertaking in commercial real estate finance. It is often the final item to be resolved in a transaction, partly because insurance companies frequently need information from third-party reports before finalizing insurance policies.

Lenders want to ensure there is adequate property insurance in place to protect the value of the property and collateral during the life cycle of the loan. Typical coverage includes replacement cost, business interruption, ordinance and law, flood, windstorm, earthquake, and terrorism. CMBS loans may have additional coverage requirements beyond what is required in a conventional loan.

In recent years there has been a shift in the property insurance industry due to the number of natural disasters and other environmental factors. This has had a significant impact on the commercial real estate lending market due to the rise in insurance costs and the fact that some coverages required in many loans are no longer available or have greater limitations. This means that some existing and new borrowers are unable to meet their lender's insurance requirements.

With required coverage either not available or limited in certain markets, new and existing borrowers must work with their lenders on any loan modifications that need to be made prior to delivering a Certificate of Insurance to the lender.

Listen as our authoritative panel discusses the latest developments in property insurance coverage and lender requirements and provides guidance for borrowers and lenders navigating the evolving market conditions.