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Insurance companies reduce coverage for sawmills



Sawmills, which saw demand for their products increase during the pandemic as DIY projects increased, are facing their own supply and demand issues in insurance.

Insurance capacity has shrunk as the timber sector continues to experience significant losses, with large fire losses an ongoing concern, say industry experts.

Insurance companies in the sector have struggled with profitability, says Jay Hanna, president of Woodus K. Humphrey and Co. unit from Amwins Group Inc.

Many insurance companies have left the market, and "now it's a real issue of supply and demand," Hanna said.

Several major industry losses this year were due to insufficient hot working protocols, Amwins said in his state of the market Q2 / Q3 report released in August. "The remaining insurers take loss control very seriously," Hanna said.

Capacity is hard to find, and pricing reflects that, says Matt Little, Atlanta-based vice president at McGriff, Seibels & Williams Inc., part of Truist Insurance Holdings Inc.

"There's a huge pressure on premiums , conditions, detentions and deductible levels. As of September 1

, there does not seem to be any relief in sight, says Little.

In such a tight market and with few insurance companies willing to take out the risk, capacity is being used "very carefully," he said. "Double-digit increases are the norm," he said.

Deductibles have also increased. "Value, the deductible is rarely below $ 100,000 and usually climbs to $ 500,000," said Hanna. It's tough. You have fewer insurance companies that want to get into the niche and write off the exposures because of the losses, says Briscoe. Pennsylvania Lumbermens Mutual has insured timber and woodworking companies industry for 126 years.

The total insurance value of a sawmill and heavy fire loads mean that the insurance companies take on significant exposures, he said. "If you have a loss, it will normally be a large loss upwards of $ 100,000, sometimes a few million dollars. When insurers think they have to weigh whether the risk is worth the reward for writing this type of business," Briscoe says.

In the event of a loss, the risk of significant downtime or business interruption for mill owners may be a problem, a factor that has been exacerbated by the pandemic, experts say.

another factor as timber prices remain high, despite falling from record highs earlier this year.

Business incomes or cut-off margins have increased "dramatically" by about 30% to 40% due to demand, Mr. Sa Hanna.

Adequate valuation of the company if they have a loss of revenue for the company. A real estate policy is important, Little said. Policyholders should make sure they have a sales price valuation on their stock and inventory, so that "if you sell equipment for $ 1 million today and you have that fire or windstorm, the insurer will pay you that million dollars," he said. he. [19659002] Mill owners need to understand the value of their total insurance, Briscoe said. “A good starting point is to make a commercial assessment of the buildings and equipment. It really relieves a lot of guesses from the insurance perspective, he says.

Longer-than-normal waiting times for equipment can make it harder to get going again after a loss. "If you were to buy new equipment, it would be one to two, or even a three-year waiting list to get that equipment if you had a loss," Briscoe said. Used equipment that can be refurbished is also deficient and leaves mill owners "at the cost of everything available," he said.

Completing a business income sheet is crucial to understanding where a mill's revenue is generated, what its exposures are for an upcoming policy period, and whether it has adequate coverage for business outages, Briscoe said. Catalog

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