Insurance risk is interdependent with inflation – but how does the relationship play out in the real world?

Insurance risk is interdependent with inflation – but how does the relationship play out in the real world?

Over the next couple of years the value of your assets will fluctuate a lot, don't get caught out on insurance....

Insurance valuation

We have all seen the headlines over the last couple of years, basic metals and fabricated materials have spiked in some instances by 24.2% in 12 months to March 2022. Iron & steel costs were up 36% in the same period, ….... the list goes on. All resulting in the inevitable over inflationary increases of built assets rebuild costs, a phenomenon that everybody is painfully aware of.  

However, with inflated values for built assets, a trap is being made for landlords everywhere. Declared property valuations are becoming outdated at an alarmingly high rate as the rebuild costs of properties continues to increase with inflation. With insurance policies being based upon a declared valuation, more and more landlords are finding themselves at risk with undervalued assets and therefore are underinsured, with massive financial exposure.

With inflation rates increasing at the rate they are, insurance companies are becoming even more diligent on the current declared property valuations and how recently a formal independent assessment has taken place - All as a reaction to the volatile landscape. It is expected that property values from 2021 are approximately 15% too low, resulting in landlords being underinsured by 15%.

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A simple rebuild insurance assessment  conducted by the Vantage team will reassure you that your asset is adequately valued, here is our recommendation for the next 3 years:

2023 – With inflation at a high, conducting an RCA is integral to ensure you are not under insured.

2024 – Inflation is predicted to drop, conduct an RCA to ensure you are not over insured and paying insurers more than is necessary.

2025 – As we hope to see the inflation settle, conducting an RCA in 2025 will ensure you property asset is set to remain stable and therefore biannual assessments would be recommended.

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We work across the full range of commercial property, with particular specialisms in retail, offices and warehousing. Our team is built around expertise and knowledge, providing clients with premier independent advice.

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