23 September 2022Property and Casualty Acturial

HUB launches new tenant captive insurance

Global insurance brokerage and financial services firm Hub International has developed HUB Tenant Default Captive Insurance for real estate owners, operators and managers of multi-family properties, commercial space and other housing in the US and available in Canada in 2023.

According to the company, as a landlord-controlled captive program HUB Tenant Default Captive Insurance eliminates the hassle of security deposits, lowers barriers for prospective tenants to improve occupancy rates and creates an additional revenue stream for property owners by enabling them to retain excess premiums.

“Most landlords' number one concern is receiving rent payments on time. When a tenant defaults, it can take months for landlords to regain their property and get another tenant into the space,” said James Stuart, HUB's real estate specialty practice leader. “Our innovative solution, HUB Tenant Default Captive Insurance, acts as a safety net to protect our clients' assets, improve financial outcomes and mitigate unforeseen loss.”

HUB Tenant Default Captive Insurance is a landlord-controlled insurance captive program that replaces traditional security deposits. It is currently available in the US, and in 2023 in Canada, to properties with a minimum of 500 units. Each participating landlord within the captive gets their own unique program. In a typical program, landlord is beneficiary of the policy which allows for elimination of security deposits. Tenant pays premium (1-2% add-on to rent - based on underwriting) in lieu of security deposit. All premium quotes are subject to review and binding authorization by the captive manager.

The captive-owned insurance covers loss of rent, damage to individual unit/apartment, and legal expenses involving eviction. Landlord is not limited to the typical first and last month's rent for their recovery. The captive could pay the entire loss with available funds that are in the captive. Any leftover collected premiums go straight to the property owner's bottom line.