When Hurricane Ike struck Houston in September, Camden Property Trust's apartment communities suffered an estimated $1 million in losses, including downed trees and roof damage. After the storm, crews began clearing debris and making repairs and when power was restored, tenants who had evacuated began to return.

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Camden, a REIT that owns 178 apartment projects around the country, was able to minimize disruption to tenants through careful preparation. Well before hurricane season began in June, the apartment owner organized teams of employees who prepared to notify tenants and distribute supplies. The REIT contracted with vendors who agreed to step in after a storm to make repairs.

“By careful preparation, we can limit losses — and encourage insurance underwriters to lower our premiums,” says Shawn Cox, Camden's director of risk management.

Whether or not they face hurricanes, many building owners are making an effort to control insurance costs. Property managers are emphasizing maintenance programs, which can help to lower premiums. The cost reduction measures are particularly important at a time when the economy is sluggish and profits are under pressure.

To reduce bills, owners should aim to improve buildings and persuade underwriters to reduce premiums, says Cox. A typical risk management program may start by making buildings safer, and installing reinforced roofs and durable windows.

After the improvements have been completed, owners supply information about the work to underwriters, who plug the data into models that predict maximum probable losses. Because reinforced buildings are less likely to suffer damage, the premiums often can be lowered.

Planning for emergencies

Camden ensures that all its buildings incorporate the latest technology to protect against storms. The REIT reinforces roofs and meets current standards for hurricane shutters. As an extra precaution, Camden periodically refreshes its portfolio, selling older projects and buying or developing new units that come with state-of-the-art hurricane protection.

Each of Camden's projects has detailed emergency plans, including evacuation routes and instructions for using sandbags. There are even guidelines for where to shelter pets. Each year, the detailed plans are carefully updated and presented to underwriters. “We market the plan to our current underwriters and to underwriters who might want to bid on our business in the future,” says Cox.

Owners who fail to provide underwriters with detailed data can be penalized, says Al Tobin, managing director and head of the property practice of Aon, an insurance broker. “If you don't supply data, the model defaults to the worst-case scenario,” Tobin says.

Simply supplying more data can substantially lower costs, he says. In one recent case, a risk model estimated the worst probable loss for a portfolio at $200 million. But by providing more data on roofs and safety procedures, the property owner was able to lower the maximum loss figure to $100 million. That decreased the annual premium from $6 million to $4 million, according to Tobin.

How to sway underwriters

While property owners encourage competition among insurance companies, they should view underwriters as allies, not adversaries, says Ray Macke, chief operating officer of Stream Realty Partners, which owns and manages properties in Texas. Macke says an individual underwriter may want to lower a bid and win business, but he or she must contend with tight-fisted senior managers. The task of the building owner is to help the underwriter make the case for lowering premiums, says Macke.

To give underwriters more ammunition, Stream Realty runs extensive training and safety programs for tenants and employees. In addition, the company carefully maintains and tests mechanical systems in buildings. All the precautions are then documented and presented to insurers.