REIT Insurance Experts Discuss Changes to NAREIT Program

Melissa Lishner, director at Crystal & Company, and Jeff Zaffino, underwriting manager at Arch Insurance Company, joined REIT.com for a video interview to discuss the latest coverage changes incorporated into NAREIT’s Directors and Officers (D&O) Liability Insurance Program.

Crystal is the program administrator for the program, which is underwritten by Arch.

Lishner explained that during the past year, Crystal and Arch have worked with the NAREIT insurance committee, as well as outside counsel, to work out broad changes to the policy in order to provide state-of-the-art coverage. Changes to the program have been received “very positively” by membership, Lishner said, which has resulted in significant numbers of new clients.

Lishner noted that some markets have imitated the new program language, while other markets that had been opposed to the changes are now incorporating them.

“We do notice that most of the other markets are charging additional premiums for the enhancements or mandating a higher retention level to get the enhancements,” Lishner said.

For a better understanding of changes made to the program, Lishner encouraged REIT members to schedule a face-to-face meeting with Crystal or Arch to go over specific language. The best time for such a meeting, she noted, is two to three months prior to a policy’s renewal date.

Zaffino, meanwhile, outlined the criteria used in the renewal process.

For a general risk evaluation, Arch looks at accounting and regulatory compliance, corporate governance and compliance with the Foreign and Corrupt Practices Act (FCPA) for any REIT that may have foreign operations. Zaffino noted that Arch also looks at cybersecurity:  how companies protect their business partners’ data and how they protect themselves against hacking schemes.

From a REIT-specific basis, Arch considers a firm’s business mix, its  mergers and acquisitions, and its joint venture strategy. Arch also looks at the firm’s investor base, including whether it contains any activists.

Zaffino stressed the importance of the underwriting meeting.  In many cases, the meetings can help simplify the process “and get us comfortable with something we may view as more risky,” he said.