Tighter insurance requirements may continue in improved market

Tightened insurance requirements by commercial lenders, which began during the Great Recession, look to continue even if the lending market improves, experts say.

“I think (the new requirements) will extend past any recovery the lending market experiences,” said Brian Ruane, executive vp and national real estate and hospitality practice leader at New York-based Willis North America.

“Lenders became more conservative on their insurance requirements as a continuation of the overall trend toward more conservative loan underwriting. It's hard to predict the future, but I would suggest that these principles and practices need to become standard operating procedure.”

Janice Ochenkowski, managing director of global risk management at Chicago-based Jones Lang LaSalle Inc., said some lenders might relax covenant language at a later date so it better reflects the market or allow less stringent enforcement of current requirements.

“But for the relatively near future, we're not going to see much relaxation of the standards and requirements, nor will lenders be any less diligent about their implementation,” she said. “I can't imagine that a lender would decide that now that the crisis has passed, they can relax a bit.”