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IRMI Update

Risk Management & Insurance Commentary, Tips, and Tactics
November 14, 2012 | Issue 283 | ISSN: 1530-7948

In This Issue


Next year might well be named the "Year of the Policy Revision," since Insurance Services Office, Inc. (ISO), is filing new versions of many of its standard policy forms. For example, new editions of the following will be put in place during 2013:

  • Commercial General Liability Program
  • Commercial Umbrella Liability Program
  • Commercial Property Program
  • Equipment Breakdown Program
  • Commercial Auto Program
  • Business Owners Program

Recently I read that as much as 50 percent of our professional knowledge and skills becomes obsolete in 5 years. Certainly, the continuing evolution of policy forms is part of the reason this happens to risk professionals. IRMI will be working hard to help you keep up with the changes with updates to the reference services and continuing education courses you buy from us. But, it sure is challenging, isn't it?

The frequency of policy form changes seems to have increased substantially in the last decade or two. Do you believe that the benefits of the improvements in the forms changes outweigh the challenges of updating your knowledge? What tactics do you employ to make certain your team gets up to speed on new forms quickly and does what is necessary to assure that coverage is properly written? Share your thoughts with others in the IRMI LinkedIn Group.

If you manage or insure the risks of oil and gas production companies, drilling contractors, or well servicing contractors, consider attending the IRMI Energy Risk & Insurance conference in Houston on March 4–6. See the agenda and speakers and register on I hope to see you there.

All the best,


Jack P. Gibson, CPCU, CRIS, ARM
President & CEO
International Risk Management Institute, Inc.

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Risk Tip

Beware of Vacancy Exclusions in Commercial Property Policies

It is common under standard commercial property policies for a building to be considered vacant if, for more than 60 consecutive days, it has had only 30 percent occupancy when measured by area. Consider a 10,000 square foot building that's been divided into three separate units, where one is considerably larger at 7,000 square feet. If that unit is unoccupied and the owner is unable to find anyone to take any of the space, after 2 months, by definition, this building is considered vacant, despite the two other units being occupied.

Insurers have traditionally been reluctant to issue vacancy permits when buildings become unoccupied. In the past, only surplus lines insurers have been willing to write insurance for vacant properties. However, since admitted insurers will sometimes consider them, it's prudent to first check the standard marketplace before going to the excess and surplus lines markets to place these risks. Beware, however, that coverage provided for some perils that become more likely with vacant buildings will vary, making it important to carefully check and compare coverage. It is important that both property owners and those who lease space understand this important policy limitation and avoid its application. For example, concessions can sometimes be made to tenants, such as dramatic reductions in rent for a period of time, to keep the building occupied. Similarly, it may be prudent to divide larger unleased spaces into smaller spaces that are more easily rented to get over the 31 percent threshold.

Taken from the May 2010 issue of The Risk Report.

GET PUBLISHED IN IRMI UPDATE: Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. We'll acknowledge your contribution. Submit an IRMI Update risk tip.

Recent Articles on

New Expert Commentary

There are 1,400+ risk management and insurance articles on Below you'll find summaries of some recent additions with links to the articles.

What's New in Your IRMI Library

Microcaptives 101

Two relatively recent developments have encouraged the formation of captives with less than what was traditionally considered the minimum in annual written premium ($3 million) to justify use of a captive. The first factor is the increased use of rented captives. The second development is the increased use of high-deductible programs for lines such as workers compensation. Instead of assuming risk from a fronting company, many single-parent captives started to write direct deductible reimbursement programs.

This movement was also aided by special income tax rules (Section 831(b)) that apply to certain types of small insurance companies. When the requirements of these rules are met, the captive is not required to pay federal income taxes on its underwriting income.

The October issue of The Risk Report discusses the microcaptive trend and how this very favorable tax treatment comes into play. If you subscribe to The Risk Report, check it out using the appropriate link below.

For summaries of other new and updated information in your IRMI library, go to What's New on IRMI Online or What's New in ReferenceConnect.


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