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Rates low, but placing customized coverage can be difficult


Shopping center owners and managers are finding lower rates and readily available capacity in the U.S. liability insurance market, but that does not mean policyholders are getting all of their needs met.

Eamonn Cunningham, chief risk officer for the Westfield Group in Sydney, Australia, said he still hits roadblocks when he asks insurers to customize a policy to his company's needs--even though he's a large buyer of insurance.

The insurance Westfield buys is "reasonably formula-driven. It's really an actuarial exercise," Mr. Cunningham said.

"They don't understand how the business works," he said.

Westfield's corporate structure treats each of its 121 shopping malls worldwide as a separate profit center. So its insurance program must be set up so premiums and self-insured retentions are specific to each mall.

Shopping center owners or managers that are limited liability corporations or partnerships must be aware that the standard Insurance Services Office-based general liability language does not, in some cases, address their specific needs, said David Grinblatas, director of middle market industry solutions for Hartford Insurance Co. in Hartford, Conn.

Most insurers are not willing to write first-dollar liability coverage, said Brian Ruane, executive vp and director of the real estate and hotel group for Willis Group Holdings Ltd. in New York.

Though policyholders often must take a significant retention, many insurers are willing to provide more coverage above those retentions and to negotiate on terms and conditions, Mr. Ruane said. "As rates go down, coverage goes up," he said.

Rate trends depend upon several factors, said Mary Pipino DeMaiolo, area president and niche managing director, shopping center insurance, for Arthur J. Gallagher Risk Management Services Inc. in Youngstown, Ohio. The size of the individual retail center, the insured's portfolio of retail centers and geographic location all are reflected in the rate, Ms. DeMaiolo said.

"Attachment points have shown a steady decline, which is typical of a soft market," said Scott Bayer, senior vp of the general liability division at Liberty International Underwriters in Boston. In addition, he said, policyholders with self-insured retentions are seeing smaller deductibles.

Novato, Calif.-based Fireman's Fund Insurance Co. prefers writing first-dollar coverage to have more control over claims, said Stephen Bushnell, the company's product director, real estate innovation team.

"With a quick response (to a claim), even serious losses can be handled without going to court," Mr. Bushnell said. He said rates have been going down, and plans that are experience-rated in particular can help lower premiums.

Fireman's Fund also offers a crisis management endorsement to property policies, a somewhat unusual cover that provides instant help by a public relations firm and and also provides counseling services to victims. "These are stopgap measures that mitigate future losses," Mr. Bushnell said.

Tim Bunt, vp and corporate risk officer for CB Richard Ellis Inc. in Stamford, Conn., said liability rates are flat to down 10% for the worldwide real estate services company that also manages shopping centers.

Brokers also say they are seeing decreases in shopping center clients' rates.

"We are seeing decreases in rates of 20% to 25%," said Kathleen Felderman, senior vp and director of real estate for brokerage Lockton Cos. L.L.C. in Denver.

Ms. Felderman noted that insurers "are much more interested in being creative" and flexible with limits, terms and conditions. For instance, she said, one insurer has loosened exclusions and broadened coverage on a policy that covers the liability of kiosk operators in malls.

Lockton likes to give the top executives of the client company the opportunity to "tell their story" directly to the underwriters, Ms. Felderman said. Insurers will be flexible "if your loss history backs up what you say you do" in risk management, she said.