How to Choose Reliable Insurance Coverage for Commercial and Industrial Real Estate: Ukraine’s Market Infographics
September 11, 2015
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The CEO’s choice of insurance coverage for large real estate in Ukraine is defined mainly by three factors which are the cost of the insurance policy, deductible amount and insurer’s brand. Although the risk of the damage is not directly defined by the size of the enterprise, there have been cases of major damages suffered by the Ukrainian real estate resulting in the enormous sums of indemnification paid by the insurance companies.
In 2007 DataLux’ warehouse suffered major fire which led to the indemnification worth of UAH 190 mln.
Year 2010 saw another fire, this time destroying Eldorado’s stocked inventory worth of UAH 90 mln. The same year became crucial for Vesta Industrial company as the fire damaged Ukraine enterprise’s real estate for the sum of UAH 100 mln.
In 2011 fire in the hypermarket of Novaya Liniya in Zaporizhya led to UAH 15 mln worth of insurance indemnification.
The most recent fire affected petroleum storage of BRSM-Oil in Vasylkov within Kyiv region in June 2015. The facility had minimal insurance coverage of UAH 1 mln with the petroleum having no coverage at all.
The abovementioned cases prove that, figuratively speaking, no one is insured against major losses. However if you are insured literally, you receive a decent protection against direct and indirect losses.
Very often the Insured do not take into consideration that the loss of profit or fixed cost, incurred due to the insured event, are not covered by the standard PD policy.Judging by experience, in terms of real estate Ukraine’s companies tend to choose property damage (PD) insurance only which covers the insured facility or its contents.
However such real estate (Ukraine or any other country alike) as shopping malls, office and business centers, factories and plants, warehouses and logistic complexes bring income due to their operations only. That’s why direct physical damage is usually accompanied by subsequent financial losses caused by temporary shutdown of the insured object. This means that if the goods are neither produced nor sold the renters do not pay rent which brings about indirect financial loss. Very often the Insured do not take into consideration that the loss of profit or fixed cost, incurred due to the insured event, are not covered by the standard PD policy. However they can be insured by the business interruption (BI) coverage added to the standard PD policy.
In the field of real estate Ukraine’s insurance market offers the effective PDBI agreement which provides for the Client to receive indemnification for the indirect financial losses incurred due to the occurrence of any peril stipulated by the property damage agreement. Sometimes the indemnification amount under BI section of the policy even exceeds the corresponding amount under PD section.
The info graphics chart below demonstrates the bullet points and case studies on the topic in question.
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