In a nation where the poverty rate has inched above 15 percent, it makes sense that affordable housing is on the minds of many. This list includes insurers, which are figuring out how to cover this high-demand class.
Many local governments are requiring affordable housing, a segment that now tallies 27 percent of the rental housing market in the nation. This type of housing is only expected to grow and should provide ample demand for specific insurance coverage for these risks.
Last month Wells Fargo Insurance Services USA Inc. launched a program to target this niche in conjunction with the National Affordable Housing Management Association (NAHMA). This gave Wells Fargo an instant huge boost in access to the marketplace, as NAHMA represents two-thirds of the top 100 affordable housing providers in the country,
The Multifamily Affordable Housing Insurance Program (MAHIP) is not only available directly from Wells Fargo, but it is also open to approved sub-brokers. The process involves going to the MAHIP website and downloading the contract and returning it with a copy of the agent license, W-9 and proof of errors and omissions coverage. Megan Davidson, vice president of Wells Fargo Insurance Services, said the firm has already seen tremendous interest by sub-brokers and some great submissions.
“By allowing access to our program via clients’ own trusted insurance brokers, we expect the program to grow rapidly,” Davidson said.
Coverage is available in all 50 states though rates will vary based on local risk profiles. Davidson said some of the greatest interest so far has come from affordable housing in windstorm or catastrophe-exposed areas, something the program can cover.
This is by no means Wells Fargo’s first foray into covering affordable housing. The company has offered coverage for affordable housing since 1987 and has had the endorsement of the Council for Affordable Rural Housing.
However, this new product was designed specifically with the NAHMA in mind. The association’s membership base includes owners and developers of affordable housing, as well as management companies.
The national broker counts many large affordable housing providers as clients, but working with NAHMA gives Wells Fargo access to a large group of insurance buyers with a common mission. A program like this also favors an association as what is essentially block buying gives it a chance to get preferred treatment from carriers, including expanded coverage and competitive rates.
This product is designed to cover all the needs of an affordable housing owner or manager, including everything from standard property and casualty to low-income housing tax credit liability and bed bug infestation. Tenant discrimination coverage is also available to protect against the rising number of claims based on the Fair Housing Act and other regulations. Auto coverage can also be added.
Wells Fargo believes property coverage for these kinds of facilities will probably be one of the most important issues in the future. Property issues are of particular concern for many NAHMA members, who have a reputation for having high-value and quality facilities.
Davidson said capacity is going to be an issue following the release of the revised hurricane model, RMS 11. However, the buying power of an association as large as NAHMA can help combat that pressure.
Wells Fargo is also using this product as a way to educate insurance markets about the property risks overall for affordable housing. The risks can actually be less in some cases because affordable housing is subject to mandatory inspections, sometimes multiple times a year. Regular market housing does not require such close attention.
Overall risks for affordable housing are very similar to market rate rental housing. Bed bugs are of particular concern. Wells Fargo fears that down the road some insurers may look to exclude bed bugs, insects and vermin.
One of the unique issues for affordable housing has to do with exposure to loss for tax credit properties following physical damage. If a delay is considered unreasonable, the tax credits can be lost for the property.
Alleged errors or omissions in the operations of low-income housing tax credits are another specific area of exposure for affordable housing, as they can result in the need for indemnity and defense.
MAHIP is administered out of Wells Fargo Insurance Services in Seattle.