Plugging the HNW protection gap

As wildfires put more high-value homes and private collections at risk, owners are facing significant uninsured exposures on their assets

Henry Watts – specie underwriter, AEGIS London

 

A heady combination of heavier rainfall promoting greater vegetation growth, hotter summers that produce more combustible materials, and stronger winds that aid the spread of fire are making wildfire season in the US more challenging year by year.

 While the destruction of property belonging to homeowners and businesses in wildfire-prone zones has been a regular news topic in recent years, in 2018 the focus was also on celebrities whose multi-million-dollar homes were threatened by wildfires.

 As media reports from the time indicate, California’s Woolsey Fire in November 2018 destroyed the Malibu homes of celebrities including Miley Cyrus and Liam Hemsworth, Neil Young, Robin Thicke and April Love Geary, Pierce Brosnan, and Gerard Butler.[i]

 The Woolsey Fire also forced the evacuation from neighbouring Hollywood Hills and Beverley Hills of famous residents including Kim Kardashian, Caitlyn Jenner, Orlando Bloom, and Lady Gaga.[ii]

 In addition to homes and vehicles, these wildfires will have put a significant quantity of assets including fine art, jewellery, and other collectibles at risk. And while these valuable items are likely to be heavily insured, policyholders are currently facing significant deductibles for natural catastrophe exposures.

 Although deductibles are typically not a feature of insurance coverage in the US private collection space, they are applied in the case of natural catastrophe exposures such as windstorm, earthquake and wildfire.

 With such a clear protection gap in the market for risks that, in a number of territories, are becoming more prevalent, AEGIS London saw an opportunity to plug that gap with a deductible buy-back product, which we launched earlier this year.

 Unusually for a class of business which sits in the marine space, the Fine Art & Collectibles Deductible Buyback policy, which is available via the OPAL online quote and bind platform, can be structured on a named peril catastrophe basis as well as an all-risk basis and is, to our knowledge, the only policy of its kind currently in existence.

 This is obviously a fairly niche product, so the limits offered are relatively modest compared to commercial property policies. But it is precisely because these are small limit, lower premium policies that it is extremely efficient to offer them through the OPAL platform, making the product a more compelling offering for domestic insurance agents and brokers in the US.

 As a niche class of business, fine art and specie – and the private collection space in particular – has typically been traded in a fairly bespoke fashion and has minimal exposure to the world of online placement platforms.

 However, the OPAL Fine Art & Collectibles Deductible Buyback product has been designed to be as simple as possible, with a small question set and minimal referral structures which means quote and bind can be achieved in under a minute in most cases.

 This novel product offering comes at a time when the US private collection space – particularly in California – has been facing a number of challenges.

 Leading markets on the admitted side have exited the space following a spate of wildfire losses, creating capacity constraints for domestic buyers looking to purchase meaningful limits. This has driven more involvement from London market writers, but cat deductibles are typically common among the policies now being offered to high-net-worth insureds living in cat-exposed areas.

 The OPAL follow form coverage is therefore specifically designed for HNW individuals, providing cover for valuable articles including jewellery, furs, and watches and for a diverse range of private collections such as fine art, collectibles, and unique assets, with policies tailored to encompass a wide variety of collectible items.

 

HNW Homeowners Wind Deductible Buy-Down

In addition to the valuables cover, AEGIS London offers high-net-worth customers a wind and hail deductible buy-back on Opal. This protects properties against some of the damaging effects of extreme weather that are frequently excluded from standard home insurance products. The product enables the end-client to lower deductibles for wind and named storm damage to their private homes, reducing the potential cost of repairs or rebuilding following a natural catastrophe event.

 In plugging this gap in the US high net worth market, AEGIS London’s Fine Art & Collectibles Deductible Buyback product seeks to give greater assurance to policyholders, more flexibility to intermediaries in the US in their property offering, and a fast and efficient solution to an increasingly volatile cat risk environment.