How To Develop a Well-Managed Property Valuation Program

Inflation makes it critical to reexamine valuations for property and equipment

A big part of reducing risk exposure is developing accurate loss scenarios. To do that, risk managers must have accurate valuations of property and equipment. But historic inflation may have changed those valuations drastically.

In response, businesses are reassessing how they value property and equipment. They are also addressing the very real possibility that inflation has left them underinsured – and vulnerable to claims that won’t cover the cost of rebuilding or replacing equipment.

With stakes so high, it’s critical to get valuations right. Doing so:

• Assures proper risk transfer terms and costs for exposures
• Includes better estimates of risk improvement recommendations
• Establishes accurate loss estimates and risk modeling
• Includes up-to-date natural catastrophe accumulation including wind, earthquake, and flood
• Offers informed retention/reinsurance analysis

How To Establish Credible Replacement Cost Values

A major step in the valuation process is establishing credible replacement cost values. Replacement costs for insurance purposes are not developed in the normal preparation of business financial statement. Instead, it’s a process where risk managers and property valuation specialists triage a portfolio in several ways.

Here are some of the actions that engineers at TÜV SÜD Global Risk Consultants take:

• Reviewing a statement of values (SOV)

• Establishing accurate square footages, and dollars-per-square-foot calculations
• Benchmarking against similar occupancies and in-house databases based off previous appraisals
• Desktop estimates using Construction Occupancy Protection Exposure (COPE) data; mapping tools and databases; and reliable asset records
• Discussions with plant personnel
• Look for consistencies and inconsistencies between statement of value and assessment findings
• Discussions with preferred vendors and equipment manufacturers to determine installation and engineering costs
• On-site valuations for the highest level of valuation service and accuracy

Learn More About Insurance Asset Valuations

TÜV SÜD Global Risk Consultants has helped some of the world’s most successful businesses reestablish property and equipment valuations in the wake of inflation. Those valuations are critical in helping our clients determine proper risk management processes and secure the right insurance coverage.

If you’d like to discuss your insurance asset valuation needs, contact us today.