Real Estate, Investments, Insurance AND Risk

I did not have any notion of writing this blog this morning, when I retired to bed last night, but…a restless night of sleep and here is what I am now doing. Why? Well, I awoke before 4:00 AM, unfortunately (would you believe that my body has still not adjusted to the time conversion from Standard to Daylight Savings so it should still be 3:00?) – alert, for anyone who knows that I am not a “morning person”, I am sure he/she is laughing right now – and started to think of Japan’s devastation and how it might affect us – my business, my clientele – at home, here, in Canada. An hour later, I decided to arise, walk for 30 minutes, visit McDonald’s for morning coffee (while there, reading “The Sun” cover to cover – when was the last time I read a daily newspaper front to back?) and now, 2 coffees later, it is 7:00 AM and I am writing my first blog in several weeks. OK – my grammar may not be indicative of an “alert” individual but I am excited so…please excuse my run-on thoughts.

How does Japan affect Canada and how is it possible that it will have any impact on my clientele? If you reside in Ontario, Southwestern Ontario, the “GTA”, “Golden Horseshoe” or Waterloo Region, invest in real estate or own any business, what am I possibly thinking, eh? Well, I have seen indications that Natural Gas prices are rising around the world – so? Remembering how Hurricanes Andrew and Katrina impacted the cost of building materials – construction items like labour and lumber – following their aftermath, several years ago, made me think about the buildings and contents of my many clients and what other businesses and investors own. Whenever a disaster like this happens, there are worldwide effects on many items.

One example is the manufacturers who import their machinery/equipment from outside the borders of our country – yes, we have seen a large increase in that during the economic recovery of 2010/11 – and watching the value of the “loonie” against the Greenback and Euro on a daily basis. This is something that I like to remind business-people, especially the small manufacturer, about (currency risk) and I don’t know many of my competitors in the insurance sector who ever discuss this with their clientele.

A second example is Trade Credit because what about the many businesses that will not be able to re-open after a disaster such as this? I know that we will not suffer any tsunami, in our interior position in Canada, but there are many other types of disasters we could face and what of our customers? Why would you have Export Development Canada (EDC), which is a fine Government Agency, handle insuring your Accounts Receivable when there may be other options, less costly and/or better, available? Why have a banker insist (most don’t, would you believe?) that you obtain this form of protection because they no longer feel your risk is acceptable to them (and you can be guaranteed that it will be a high risk, long before it gets to this point)?

A third example is that of “Contingent Risks”. I know this does not impact many manufacturers, wholesalers or retailers (really?) but I have 1 client who mentioned something to me (yes, I continue to learn from my clients, too) of his concern in an area that is unique – 60-70% of this firm’s goods are from one American firm and his concern with contingent supplier chain management is with “key person” protection (life and disability) as opposed to the normal Property/Casualty “we” might think about (fire, flood, earthquake, etc.).

Another example is the building owner who “knows” what it costs (OK, I’m now thinking of the builders/developers) who build and own a high-rise apartment building or industrial structure – what if you own several or many properties and would be reconstructing yourself? Do you ever consider what the impact of an earthquake damaging many of your buildings might mean? The insurance company will pay for lost rental income but not if there is a delay in the repairs/rebuilding that might occur if you have 10-12 buildings and are only able to handle 3-4, correct? How will your Lenders – the banks, mortgage companies, life insurance companies, etc. – feel, then? What of the length of term you may then require for “rental income” interruption? I can think of 1 client, in particular, who knows what the constructions costs are of their multiple properties, having extended reconstruction terms for business interruption, but has not addressed the potential for increased reconstruction costs – this is something we will be addressing today – and a partial but significant loss is much different than a total loss (remember that term “co-insurance”?).

Realtors – yes, I am targeting my friends in the community at CB Richard Ellis (Dietmar Sommerfeld, et al.), Mr. Benjamin Bach, DTZ Barnicke, Colliers and Coldwell Banker/Peter Benninger, etc. (gee, I hope I am now getting some internet hits for this J) – that know which of their clients should think about this in a manner different from “tradition”. I am NOT the traditional insurance broker but a broker who emphasizes Risk and discusses Risk Appetite with my clients.

Bankers and lenders – I know you cannot direct business but keep this in mind when you are funding your loans! Some requirements are reasonable, others are not and you can refer to me for advice on what is and should be required by you.

Lawyers – you should well know of your Errors and Omissions exposures when handling legal matters but why not assist your clients in providing for all their professional requirements?

I do wish to state that my prayers are with the Japanese at this time and I hate to use their disaster as an excuse for my writing this blog. I am ill when seeing the images of their recent and ongoing sadness and I choose this word because I am at a loss for a proper description of what they have faced. I hope the world will come together like we have never seen – and help you rebuild your ravaged country.

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