The Risk of Property Loss Is Growing: Here’s How to Protect Your Portfolio

Lahaina, HI, and California wildfires.  Katrina. Sandy. Harvey. Ian.

Most lenders (indeed, most Americans) will recall these names for what they are: natural disasters that wreaked havoc on properties, balance sheets, and of course, lives. But what’s less well-known are some of the statistics related to property insurance. The aftermath of Hurricane Harvey, for example, revealed that 70% of properties lacked any sort of coverage for flood damage.

But jumping ahead to 2024,  it appears that many still don’t fully appreciate the risk of property damage and catastrophes. In February 2024, Californians witnessed historic flooding throughout the state, yet fewer than 1% of properties in southern California have flood insurance.

Here’s another fact – big natural disasters create big risks for residential and commercial lenders because when uninsured properties face catastrophic damage, it's the lender who's left "holding the bag." 

But big natural disasters are not the only risks a lender is exposed to.

Understanding Uninsured Property Loss Risk

From fires to floods (and everything in between), hazard risks include damage from hail, vandalism, household fires, lightning, water damage, and even theft. The takeaway for lenders is that property damage or loss isn’t “seasonal,” and that’s a major problem for lenders because legacy methods for monitoring risks to loan collateral may no longer be adequate or wise.

Protecting Your Institution from Uninsured Property Loss

Insurance is all about the transference of risk, which is as important to lenders as it is to property owners. Working with AFR Services, lenders will not only reduce their risk from property loss--they can virtually eliminate it. For example, when AFR Services takes over insurance tracking for a lender, we often find that up to a third of a lender’s collateral does not have proof of insurance. If a lender takes advantage of AFR’s risk management program, AFR can reduce the lender’s risk to almost ZERO while emphasizing minimal impact on a lender’s borrowers. AFR Services also backs our program with a written guarantee which is unique in our industry.

AFR offers a range of risk management solutions for lenders that include:

• Regulatory Compliance Guidance
• Insurance Tracking
• Lender Placed Insurance
• Flood Zone Determinations
• Property Inspections 
• Automated Valuation Models (AVMs)
• ValueNet Desktop Appraisals
• Real Estate Tax Service
  
  

Here at AFR Services, we are experts in helping banks and credits ensure coverage through our proprietary and automated insurance tracking solution. Serving our clients for more than 30 years, and with an entirely-US based Support Team, we deliver solutions and services that are unmatched in our industry.

Reach out to our team today to learn more about how we can protect your loan portfolio better than anyone else.