Advanced E&S Group Launches Community Association Debt Coverage

August 10, 2012

Advanced E & S Group has launched the Assessment Recovery Indemnity (ARI) program. ARI is a new insurance product underwritten by member companies of the AmTrust Group, designed to help condominium and homeowner associations reduce their exposure to delinquent unit owners, bad debt and write-offs.

Community associations face difficult budget decisions as they prepare for 2013. The loss of cash flow and bad debt can cause the association to increase assessments, reduce services, or pass a special assessment. ARI can assist in the 2013 budget process with a fixed insurance premium that can replace a large unknown and unpredictable bad debt expense.

Community associations rely on the assessment income to provide the services needed to operate and maintain the common areas. However, a large percentage of owners who are delinquent on assessments are also behind on mortgage payments. A bank foreclosure limits the recovery of the association to a small percentage of the total assessment debt owed. The association may be required to write off large amounts of past due assessments, late fees, interest, fines and legal expense.

The ARI policy insures the assessment income from all properties (except developer owned) in the association. The coverage extends to any property that is delinquent during the policy period. This includes properties that are already in foreclosure, if the owner is in bankruptcy, or the property is bank owned. The policy also provides a sub-limit for legal expenses and collection costs accrued on delinquent properties.

The policy can provide up to $1 million of coverage. Each unit is insured for up to $18,000 of delinquent regular assessments that are written off due to a bank foreclosure. The legal expense sub limit is $1,000 per unit for collection expenses. The aggregate policy limit is 25 percent of the association’s annual budget for regular assessments.

“Insurance is supposed to protect the association against loss. In the past few years, a typical community association has incurred more losses due to unpaid assessments than property or casualty claims,” said Harvey Sheldon, president of Advanced E&S Group.

ARI is currently available in Florida and is being rolled out in several other states, including, but not limited to Colorado, Connecticut, Illinois, New Jersey and New York.

ARI is underwritten by AmTrust Group insurance carriers.

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