A hard lesson was learned when Tamach Group bought a Miami-Dade County warehouse this spring. The hard lesson was of how South Florida commercial property insurance costs are exploding in 2006.

The Coral Gables-based real estate investor and developer could not get a policy from the seller's insurance company. Tamach's experience is an example of how unprecedented commercial property insurance rate increases are leading to higher operating expenses and rents.

As many property insurance bills rise by 200% or more, South Florida real estate, insurance and banking officials are concerned about a possible insurance-driven slowdown in commercial property sales and negative cash flow on some properties. Regulators and rating agencies require insurance companies to have specific percentages of reinsurance coverage for the total amount of property they insure. Tamach hoped its annual property insurance premium would remain similar to the seller's $250,000.

However, Huerta said that the Zurich International, the seller's insurance company, declined to offer a policy to Tamach. Zurich and Aspen are surplus lines insurance companies, which do not have to get rates approved by the Florida Office of Insurance Regulation.

On the other hand, sellers' insurers have not renewed policies on several other properties Tamach bought this year. Banks are a factor in the insurance crisis because federal laws require property insurance on commercial and residential mortgages.

Those leases enable owners to pass increases in insurance, taxes and maintenance to tenants when leases renew. CB Richard Ellis has not received any cancellations of sales contracts in South Florida because of higher insurance premiums.
 
By M. Sese
http://realestatepress.org