Roundup: MBA Urges Standards for Terror Reporting

The MBA is working with ACORD to standardize ACORD's insurance reporting form for terrorism insurance coverage.

ACORD is a "nonprofit organization that deals with insurance providers," according to Deborah McKinnon, a vice president with the MBA's commercial/multifamily group.

The organization provides an insurance reporting form and the current ACORD 27 form or "Evidence of Property Insurance form," which is used extensively in the commercial and multifamily arena as evidence of having insurance on commercial properties and uses a "narrative style," which requires a "great deal of interpretation," Ms. McKinnon said.

And when the form is received by the servicer, the format is also amenable to "additional interpretation."

The MBA's goal now is to have a "standard form that provides enhanced clarity," which is why they are pushing for an updated ACORD 28 form or "Evidence of Personal Property Insurance" form.

The revised form would replace ACORD 27's open-ended format with a "checklist" format "to foster a clear and concise description of existing property insurance that includes types of coverage, limits, deductible amounts and exclusions," the MBA reports.

The mortgage banker trade group is now in discussions with interested parties to get additional comment on the initiative, Ms. McKinnon said.

Working through its newly formed Certificate of Insurance Working Group, the MBA has launched an effort to seek approval for the new format.

Diana W. Reid, CIWG chair and a managing partner with Beekman Advisors, said, "Commercial insurance agents and brokers share MBA's objectives of ensuring that transparent information on property coverage is readily available to avoid unnecessary and unforeseen costs incurred by our industry sectors and to provide certainty to investors."

Freddie Mac and some rating agencies are viewing the MBA initiative favorably, the MBA said, quoting Freddie Mac as saying that the ACORD form is "a good first step toward easing the burden on Freddie Mac, primary market lenders, borrowers and insurance companies."

The MBA is also working with the Council of Insurance Agents and Brokers on modifying the insurance disclosure form.

Ken Crerar, president, CIAB, said, "We look forward to working with the MBA to streamline the process of furnishing timely and accurate evidence of property coverage to the commercial real estate finance industry so that the public markets can operate more efficiently."

Through all these tie-ups, the trade association is hoping to decrease the "ambiguities surrounding property insurance coverage currently plaguing mortgage lenders and servicers, who ultimately assume liability on the property in the event of a casualty." Also, with the three-month deadline having passed for borrowers to avail of the mandatory terrorism insurance coverage offered by insurance carriers, the MBA is working with the Commercial Mortgage Securities Association and the Real Estate Roundtable to find out how borrowers are responding to the availability of the insurance.

From anecdotal evidence, the MBA has found that if borrowers believe that their properties are not at risk, they may be rejecting the coverage, according to Ms. McKinnon.

It also looks as though the more "unreasonable pattern (of pricing the insurance) has moderated slightly," she said.

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