The market for student housing has certain common characteristics and many variables. The three common characteristics are the age of the tenants (usually between 18 and 26), the fact that they are college students, and that fact that the properties are often vacant for weeks or months at a time.
Some important variables of these properties are the type and age of the structure, number of units, amenities offered, rents charged, lease terms, quality of maintenance and supervision, and overall management control.
Jessalynn Suda, assistant underwriting manager at Burns & Wilcox, says, “I've seen all kinds of different student housing risks, from apartments to single-family dwellings, duplexes, triplexes, and town homes. We have coverage requests for both property and general liability. Some risks have just one or two locations. Other submissions involve large schedules owned by a single entity.”
Atlantic Specialty Lines, Inc., has a similar underwriting appetite. Greg Provenzo, senior vice president, says, “Most of the units we cover are close to campus (but not on campus) and are owned by individuals, contractors, or LLCs, not by the university or college. The units we cover are primarily of frame or joisted masonry construction (brick facing on frame). We write urban and rural properties as well as Atlantic coastal properties.”
Markets for student housing are primarily nonadmitted carriers and include Admiral, Berkley, Essex, James River, Lexington, Lloyd’s, Mount Hawley, and Scottsdale. A key admitted market is MiddleOak.
Jim O’Neill, director of business development at New Empire Group, says, “We write off-campus student housing that is not affiliated with any university or school, and we place this business exclusively with MiddleOak.”
Student housing presents significant property and general liability exposures. Ms. Suda says, “The main GL exposures for this class of business can be attributed to the young ‘party’ atmosphere that this kind of tenant brings. Younger tenants are less likely to take good care of the property. This can lead to slips and falls and similar accidents related to poor upkeep. Younger tenants also tend to make unwise and reckless decisions (often after consuming large amounts of alcohol). Excessive alcohol use clouds judgment and sometimes causes aggression, which can result in assault and battery claims. Younger tenants tend to be more experimental and adventurous in regard to their activities, and this can lead to GL claims (jumping off balconies, drinking contests, etc). Younger tenants are also often less responsible with pets. Dog bite claims seem to be more prominent with younger owners who do not pay sufficient attention to their pets (or perhaps are just a bit more forgetful or careless about making sure that their dogs are restrained and gates are shut).”
Mr. Provenzo adds, “A key issue is whether the students who live in the building are undergraduates or graduate students. Graduate students are usually more mature and serious about their studies. We may write a building occupied by undergraduates, but we conduct an in-depth inspection. We also must know whether the building houses a fraternity or sorority. If it does, we usually don’t want the risk.”
Underwriting this class requires specific expertise. Mr. O’Neill says, “Life safety is the greatest concern. Since student housing is frequently in converted dwellings, overcrowding is often an issue. Liquor and balconies are a dangerous combination for this class.”
Ms. Suda explains, “In addition to claims history, key underwriting criteria are the age and type of students. For example, a house rented to graduate business students may be a better risk than a house rented to undergraduate students who are members of a social fraternity. Location, age, and building condition are also important underwriting considerations.”
Additional key considerations, according to Ms. Suda, are “the landlord’s experience and involvement in managing student housing and the screening process used to evaluate prospective tenants. If the landlord has a vigorous screening process, this makes the risk more attractive to underwriters. If a landlord does not allow pets, this may also be more attractive to an underwriter. I recently received a submission for an account where a real estate agent owned a few single-family dwellings and rented them to students. The agent lived nearby and visited the houses every week. She also performed the maintenance and upkeep (such as mowing the lawn). If these kinds of things are the landlord's responsibility (instead of young tenants), that can sometimes be a better situation.”
It is important to be aware of exclusions that may be attached to a student housing policy. According to Ms. Suda, “Common exclusions are assault and battery, total liquor, and animals. I think assault and battery is an important coverage for this class of business, and agents should try to obtain it for their clients.“
Mr. Provenzo says, “Some carriers have hazing exclusions. The fraternity letters may not be out front on a building, but if four or five fraternity brothers live there and a bunch of their fraternity brothers are coming over, that is a potential hazing exposure.”
According to our experts, the number of carriers that write this class has always been small. However, during the soft market, some non-specialist carriers took on these exposures. They are now starting to non-renew all but the best of the class. In addition, some pullback is being observed, particularly in the market for dwellings converted to student housing. Pricing is also starting to increase.
Both agents and carriers must approach student housing risks very carefully because of the significant potential for life-threatening situations to develop. Life safety issues must be addressed and standards maintained. An attractive risk is one where active management develops house rules and vigorously enforces them to ensure the safety of the tenants, visitors, and the facility itself. |
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