13 Feb Navigating High-Risk Tenancies and Property Insurance

When it comes to insuring properties with commercial tenants, regardless of whether they are strata or non-strata, the activities of the tenants play a key role in determining acceptance. It’s important for strata managers and property owners alike to have a clear understanding of the underwriting guidelines that may impact their insurance.

Each insurer has a different appetite and varying definitions of what they label a “high-risk” occupation. Further complicating this, an insurer’s appetite will vary based on the policy type; for example, a business pack and an industrial special risk policy. Or in the instance of a strata property, whether the property fall under a residential or commercial strata insurance policy wording.

There are grey areas that strata managers and property owners should be aware of. For example, while a bar operation may be considered an acceptable risk, any criminal related connections to the operation could make it an unacceptable risk. To determine acceptance, underwriters may require details for restaurants or cafes, such as cool room size, deep-frying practices, cleaning protocols and fire protection measures.

Furthermore, some insurers categorise “warehousing” simply into low, medium or high level of risk, while others underwrite the risk on specific factors such as what is stored, fire protection measures, and what activities are conducted within the warehouse.

To gain further insights into the topic, we consulted several underwriters who provided examples of occupations they generally consider high risk or non-preferred. This list is by no means exhaustive and is prepared to emphasise the importance for strata managers and property owners to provide their insurer with up-to-date tenancies.

• Tattoo shops
• Massage parlours
• Boarding houses
• Gun shops, gun storage and repair
• Brothels
• Nightclubs
• Parole services
• Manufacturing risks including woodworking and cabinet making
• Storage of goods with hazardous characteristics or high heat producing values such as paints, timbers, furniture.
• Mechanic and auto industry
• Recyclers/ scrap dealers and Waste Management

It is important to note that insurer’s risk appetite is subject to frequent reviews and potential changes. The strata manager or property owner should keep an up-to-date record of commercial tenant information, including the business activities.  A prudent approach would involve assessing the associated risks before approving a new tenant, to avoid difficulties at renewal time.

For further inquiries or clarification, please feel free to reach out. The proactive efforts in managing tenant activities will contribute significantly come renewal time.

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