Comprehensive HOA Risk Management Strategies

Thousands of homeowners’ associations (HOAs) and similar community associations exist in the United States. Originally designed to help protect property values, these organizations have expanded in scope and purpose in recent years. Most HOAs are operated like businesses; as a result, these associations face a range of liability risks. In addition to community associations insurance, developing a robust risk management plan is key in protecting organization leaders and financial assets from losses. In this guide, we will explore risk management strategies for HOAs, distilling critical information for your insurance clients.

Homeowners’ Associations 101

A community association – typically known as a homeowners’ association or HOA – is an organization that makes, modifies, and enforces rules for a given subdivision or property. Individuals purchasing property under the control of an HOA becomes the association’s members and typically pay monthly or annual dues. HOAs vary in the way rules are implemented; some associations have tight restrictions about what property owners can and cannot do with their properties, while others serve merely to assist with property maintenance and upkeep.

HOAs are usually led by an elected board of directors. The association typically obtains liability protection in the form of community associations insurance, which offers coverage for property, general liability, directors & officers liability, and crime in addition to optional coverages.

Four Major Risk Exposures for HOAs

HOAs and their board members should be aware of the most common risk exposures they face. Losses resulting from these risks can put property values in jeopardy as well as result in significant expenses and legal claims. The four major categories of risk are:

  • Liability Risks – losses caused by third parties, particularly if injury or property damage occurred as a direct result of the third party’s actions or inaction.
  • Property Risks – events that can result in damage or loss of properties, including both natural disasters such as fire and floods as well as human activities.
  • Personnel Risks – loss exposures due to employees, leaders, and members of an HOA leaving or retiring from the organization.
  • Income Risks – financial losses resulting from declining revenues or increases in monetary expenses. This can include failure of members to pay their dues on time or if financial mismanagement leads to the loss of funds.

Other risk exposures exist in administration of HOA rules and regulations, but the above categories represent the vast majority of losses. With robust community associations insurance coverage, the association gains valuable protection against these and other risk exposures.

Managing Risks in HOAs

HOAs have several options when it comes to risk management. Just like a business, these organizations must select the options that are right for their needs as well as their risk exposures. In addition to TCAP custom community associations insurance, HOA risk management must incorporate risk reduction and risk avoidance practices. Risk avoidance is the concept of eliminating the factors that can lead to a loss, while risk reduction is the practice of managing risks that cannot be eliminated to minimize their potential impact.

Risk financing is another powerful strategy. Most HOAs utilize one of the two following options to pay cover losses:

  • Risk Retention – where the association uses member fees and finances to pay out of pocket for losses. This is more common when community associations insurance is too expensive or not available for the organization.
  • Noninsurance Risk Transfer – where the association transfers its risk to a third party like an insurance company or financial firm. This transfer supplements the protections of community associations insurance.

The core concept of risk management for any organization is a multi-step process whereby:

  1. Risks are identified.
  2. Identified risks are evaluated or ranked in terms of their potential impact.
  3. This information is used to develop a risk management plan or strategy.
  4. Risks are minimized or eliminated where possible. 

To improve risk management, associations must share information about risks with members, helping them to understand the importance of following established rules and procedures set by the HOA. With this education, a solid risk management plan, and the protection of community associations insurance, HOAs can continue to protect property owners from expensive losses.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

Social Title: Risk Management for Homeowners Associations

Social Description: HOAS face numerous liability risks. With these strategies, community associations can gain superior protection while minimizing risk exposures.

Cyberattacks

Critical Cybersecurity Statistics Every Business Should Know

Not a week goes by without news media reporting on another cyberattack targeting business data. Highly-publicized data breaches or networks held hostage have accelerated the adoption of cyber insurance across the business sector. As the economy begins its slow recovery from the coronavirus pandemic, cyber crimes represent a continued threat for business owners. How bad is the threat of cybercrime? In this guide, we will explore some of the statistics that every business owner should be aware of, helping them to make smart choices about cyber insurance protection.

Cyber Attacks on the Rise in 2021

Cyber threats are a looming problem for business owners. The threat has risen in 2021, following in the wake of economic challenges presented by the coronavirus pandemic. According to testimony presented to the U.S. Congress and reported widely in news outlets around the world, ransomware attacks have risen in the United States by 158%. The costs associated with these attacks have jumped dramatically as well; $8.9 million in costs in 2019 and $29.1 million in 2020 indicate a 200% increase.

Ransomware attacks are not the only concern for business owners. Criminals use a variety of strategies to gain access to computer networks in the business, government, and healthcare sectors. Cumulatively, attacks like phishing, vishing, and distributed denial-of-service (DDoS) hacks have led to the loss of billions of personal records, creating liabilities for affected businesses and straining even the most comprehensive cyber insurance policies.

Criminals do not always come from the outside. Employee-based crimes pose a significant risk for many industries, especially in the financial services field.  These crimes include social engineering hacks – where an employee poses as a manager or executive to gain access to computer systems – and fraudulent transfers of financial data, money, or business information by setting up false user accounts and directing the stolen funds or data to those accounts. A single employee-based cybercrime can result in steep losses, not to mention the reputational harm these crimes can incur on businesses.

Of course, these same attacks can come from outside an organization; an outsider can use a social engineering hack to initiate fraudulent transfers or to gain unauthorized access to critical information systems. Whether perpetrated by someone on the inside or a criminal outside the organization, the net result of social engineering crime is the same: the loss of financial and/or data assets.

Alarming Statistics for Business Owners

Cybercrime is a growing threat, affecting millions of people and thousands of businesses as criminals step up their attacks. How bad is the threat? Consider these statistics:

  • Costs associated with cybercrime around the world are expected to exceed $10.5 trillion by 2025.
  • More than half of worldwide consumers have been the victim of some form of cyberattack.
  • The healthcare industry alone will spend $125 billion on cybersecurity measures between 2020 and 2025.
  • The average cost of a single ransomware attack is $1.85 million.
  • The average annual cost of cybercrime for business and government organizations is $13 million. This figure includes losses as well as expenses associated with cybersecurity measures.

It is clear that businesses face a serious threat to financial stability due to cybercrime. Without robust cyber insurance protections, business owners may face hundreds of thousands or even millions of dollars in expenses related to:

  • Forensic analysis and data recovery
  • Ransom payments
  • Business reputation management and post-incident PR
  • Notification and credit monitoring services for affected individuals
  • Implementation of new cybersecurity strategies.

A cyber insurance policy is designed to protect business owners against the financial losses associated with cybercrimes. With this insurance and with an eye toward comprehensive cybersecurity measures, businesses and their stakeholders gain valuable protections against the growing threat of computer-based crime.

About U.S. Risk

U.S. Risk, LLC. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.

U.S. Risk announces acquisition of Regency Insurance Brokerage Services

U.S. Risk, LLC, a top ten property and casualty wholesaler and MGA, announced today that it has acquired Regency Insurance Brokerage Services (“Regency”), a wholesale broker and MGA headquartered in Hallandale, Florida, with additional locations in New York, New Jersey and South Carolina. The Regency team will join U.S. Risk Brokers, the wholesale brokerage division of U.S. Risk. Terms of the transaction were not disclosed.

Commenting on the transaction, Paul A. Riemer, chief executive officer of Regency, shared: “We are excited to join the U.S. Risk family of companies. We view this acquisition as a very positive event for our employees and are looking forward to being able to better serve our agents with the additional markets, products, and resources available through U.S. Risk.”

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U.S. Risk announces acquisition of U.S. E&O Brokers

U.S. Risk, LLC, a top ten property and casualty wholesaler and MGA, announced today that it has acquired U.S. E&O Brokers (“U.S. E&O”), a wholesale broker and MGA focused on delivering professional lines coverage for insurance agents. U.S. E&O is headquartered in Houston, Texas, with additional locations in Connecticut, Colorado, and New Mexico. The U.S. E&O team will join U.S. Risk Underwriters, the specialty programs division of U.S. Risk. Terms of the transaction were not disclosed.

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U.S. Risk finalizes acquisition agreement with USI Insurance Services

U.S. Risk Insurance Group (U.S. Risk), one of the nation’s largest property and casualty program and specialty brokerage firms, today announced the completion of its previously announced agreement to be acquired by USI Insurance Services (USI), a leading insurance brokerage and consulting firm. Terms of the transaction were not disclosed.

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U.S. Risk enters into agreement to be acquired

U.S. Risk Insurance Group (U.S. Risk), one of the nation’s largest property and casualty program and specialty brokerage firms, announced that it has entered into a definitive agreement to be acquired by USI Insurance Services (USI), a leading insurance brokerage and consulting firm. The transaction is expected to close in the second quarter of 2019, subject to customary conditions and regulatory requirements.

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Oxford Insurance Brokers expands into the marine and energy markets

Oxford Insurance Brokers Limited, an international subsidiary of U.S. Risk Insurance Group, has acquired a marine and energy team. This new team will form the core of a new Marine & Energy Division within Oxford.

The hiring of the team, who was formerly with Chesterfield Insurance Brokers, complements and is consistent with Oxford’s growth ambitions. Mark Rowland will head up the team, and will be joined by Ramsay Nicoll and Charles Reid. The team specializes in a number of marine and energy lines including marine hull and liability; marine employers’ liability; P&I; yachts; and ports and terminals.

Randall Goss, Chairman of U.S. Risk Insurance Group, said, “We are delighted to welcome Mark and the team to Oxford. They bring a range of exciting new opportunities for the Group and we are looking forward to their continued success.”

Trireme Insurance Group announces acquisition of MGB Insurance Brokers Limited

Trireme Insurance Group, the international subsidiary of U.S. Risk Insurance Group, LLC, is pleased to announce that it has acquired MGB Insurance Brokers Limited (MGB). MGB will operate alongside Trireme’s existing London brokers, Oxford Insurance Brokers and James Hampden International.

Founded in 2001, and headquartered in London, MGB is a Lloyd’s broker specializing in placing professional indemnity risks for companies in the construction, consulting, accounting, insurance, and other industries.

Randall Goss, Chairman of Trireme Insurance Group, said, “MGB’s approach to its partner brokers and clients is very similar to U.S. Risk’s. They value client service and building a long-term relationship by demonstrating their expert knowledge of their market segments. We are thrilled to have them as part of our group.”

Nick Bender, Joint Managing Director of MGB, said, “Glenn Gostling and I are delighted to join the U.S. Risk family of companies. We believe their entrepreneurial culture matches up very well with ours, and we are excited to be able to both supplement our offering to current brokers and clients and to expand our client base through the U.S. Risk network of agents.”

Take1 Insurance and L.A. Xcess combine to create powerful new insurance force in the entertainment industry

The acquisition of L.A. Xcess, a Los Angeles-based national wholesale broker of entertainment, sports and leisure insurance, by Take1 parent U.S. Risk Insurance Group LLC, announced on March 1, 2018, brings together a team of entertainment industry professionals that can provide customers with a new and broader range of insurance solutions. The move, according to […]