Corey Rekers (00:00)
Welcome back to the Accel Advantage podcast where we talk through decisions our business owners face every day around risk, money and growth.

I am your host, Riekers, and today we are joined by two of our experts in our Accel real estate division, Dustin Toner and Kate Rahfeldt Welcome to the podcast, you guys.

Kate Rahfeldt (00:30)
Thanks for having us.

Dustin Toner (00:31)
Yeah, looking forward to it.

Corey Rekers (00:32)
before we get into our topics today, can you both give the audience just a little bit of background on how you both got into insurance to begin with, and then maybe what interested you both, and specifically the real estate market.

Kate Rahfeldt (00:46)
So for me, my dad was in construction my whole entire life. So he flipped houses. I got to see kind of the start to finish when it came to the building, the selling, the buying. ⁓ He had a passion for real estate, kind of maybe actually pushed me into real estate a little bit. But I always had a passion for business. And when I jumped into insurance after college, ⁓

I had experienced a lot of success in the habitational industry right from the start, ⁓ just from that background of having that my whole entire life and being around that. So it was a pretty easy, easy jump in and that's where I found the most success.

Corey Rekers (01:26)
awesome. It's kind of fun to see if you look back kind of how your like how your parents or people in your family or people that are close to you kind of influence the future parts of your life and so it's really cool to kind of see that come full circle Kate. So congratulations on all your success and I know Dustin you you and Kate have worked

Kate Rahfeldt (01:37)
Mm-hmm.

Corey Rekers (01:45)
together now for nearly two years. ⁓ What got you into the insurance business and also more specifically into real estate?

Dustin Toner (01:54)
It was a humbling start. You know, I got an insurance six years ago, but prior to that, I joined a family office out of the Dallas Fort Worth ⁓ area and we put together real estate deals. So we placed all of our, we placed our own equity into every deal, but then we also raised outside capital. Had kind of a...

Pretty good product mix from asset class standpoint. ⁓ Hotels, student housing, warehousing, car washes, ⁓ even got pretty heavy into the medical space. When COVID hit,

You you kind of eat what you kill in that world and everything came to a halt. And I had, on that side of things, looked at a lot of the insurance stuff. I felt that for our office, as well as a lot of our GP or partners from the deal flow, it was really kind of ignored. And it was approached in the same way that these guys have approached loans. You know, go out to the marketplace, talk to every bank.

see who has the best price, move on. And in that transition, learned a lot and I said, you know what, this is somewhere where I can hopefully add value.

Corey Rekers (03:02)
First off, that's awesome. I appreciate the fact that your start was very humbling. I know when I got in the business back in 04, I also had a very humbling start to my insurance career. So I can relate to that in a lot of ways. So I do think it's cool when you take some of your past experience and apply it, especially in your career here at Accel. And it's worked out incredibly for both of you. So kudos to you both for what you've been able to build here.

foundation of our Accel real estate practice. So it's been really fun seeing you both succeed at such a high level. So let's get kind of started here and some of the ideas that both of you would have for those, I would say, portfolio managers that could be listening today. So Kate, let's go ahead and start with you. What do you feel is one thing those managers might be underestimating when it comes to ensuring their property portfolio?

Kate Rahfeldt (03:57)
question. Yeah, I think that one thing that I see on a daily basis is a lot of portfolio and asset managers, they honestly underestimate when it comes to the insurance strategy, ⁓ the value of having a coordinated approach to the market. A lot of people they assume more brokers automatically creates more leverage. That's just not exactly the case. It can usually work against you.

The best outcomes usually come from working with one trusted broker who really understands your business. They're going to know how to position the risk effectively and can leverage strong carrier relationships strategically.

Dustin Toner (04:32)
Yeah, well said, Kate. I get into a lot of...

unique conversations where we're trying to build trust and also learn and explore, you know, where are the pain points? What is the current practices look like? And something I ask all of my new clients or prospects is what is your reputation in the marketplace? If you talk to underwriters, the people that hold the pin, that make the decisions, are they just looking at your loss history? We had a ⁓ catastrophic event six years ago in the upper

Midwest called a derecho. Is that what they're looking at and saying, man, they got several million dollars in losses, or is there a narrative that goes with it? What do they do from tenant screening if it's multifamily? What do their practices look like from risk transfer and risk control? And as we really dive into the operations, I get the feedback that, we're not really talking about insurance that much.

And then it becomes a bigger conversation of, well, this is the foundation of risk management. And it starts in your operations. And then there's a correlation to what you're paying ⁓ on your premium.

Kate Rahfeldt (05:41)
And I think to add to Dustin's point, this is something that we see a lot with third party managers. A big part of what we try to do is build those relationships, have those conversations, build the trust with both the property managers that we work with and the clients. So then they understand how important a coordinated approach is when bringing a risk to the market. We see when that alignment isn't there that you can end up with.

Ownership, the property manager and multiple advisors are all engaging in different brokers. Suddenly carriers are being approached from multiple directions on the same asset. And that's just, again, going to create confusion in the marketplace and can weaken the overall submission.

I think that the managers who get the best outcomes take a coordinated approach, working with one broker who understands the portfolio, can tell the risk story clearly and knows how to navigate carrier relationships strategically. And insurance, a well-positioned submission creates more leverage than

more market activity.

Corey Rekers (06:38)
What's interesting with what you guys do versus maybe someone who works in a different space, ⁓ I have found just in talking to you both that ⁓ you may have multiple people involved in the insurance buying process and a lot of times they are not talking to each other. And so you may have a very confusing situation where you have maybe the owner going to one broker, the portfolio manager going to another, maybe the property manager ⁓ having a relationship and now what you have

is a very convoluted mess. And so I think that that's what you're speaking to is creating that synergy to make sure that they are well represented ⁓ in the marketplace. I guess if you, can you guys share a story maybe where ⁓ having multiple agents created a very negative experience for a client? Do you have an example of that?

Kate Rahfeldt (07:30)
I ⁓ actually have an example from earlier this week that Dustin and were talking about the other day. It was an HOA account. ⁓ Just to give a little bit of context, I came into this account a little bit late. There was a property management company that was shopping it. The homeowners themselves were shopping it. And honestly, in the end, I'm not exactly sure how many brokers were involved ⁓ in the end. So I initially thought this was a great

situation where I could add value. I was seeing that the building values were really, really low. I took a look at the bylaws and the declarations. It required all in coverage. So just from a quick glance, I saw that the association was clearly underinsured. And on top of that, they were talking themselves into a high deductible that didn't really fit the size of their risk profile.

Because I came in a little bit late, by the time that I entered the market, I was already blocked from several carriers that I would normally approach. On the surface, that could probably look really, really good for the insured. They're going to be getting really strong terms. What was frustrating to me is that those carriers were some of the best fits for the risks, so I couldn't approach them because without a BOR. I later found out that some of those carriers that

I would have approached and leveraged weren't even properly presented to the client or even presented at all. So.

Dustin Toner (08:58)
Yeah, Kate,

the other broker come in and actually provide underinsured values on all the buildings in their proposal with the markets that were likely to write the risk.

Kate Rahfeldt (09:10)
Yeah,

yep. So they came in really, really low. They're honestly, I hate to say it, they're probably underinsured right now. And they didn't get great terms on the table with some of the brokers that they had put in front of them.

Corey Rekers (09:24)
So

it's interesting. So what I'm getting from both of you, if you pick the wrong representation of your business to those underwriters, you may be getting, I would say, a tarnished reputation in the insurance marketplace without even really knowing it.

Kate Rahfeldt (09:45)
Mm-hmm. I mean...

Corey Rekers (09:45)
Yeah, so

I guess what I'll maybe just sum up here is what I'm hearing from you guys is if you don't work with a specialist that understands your business, you need that person to best position that business in the marketplace to achieve what they're really looking for and really do that with as little pain as possible for that portfolio manager.

It's interesting, we do experience that in other lines of business, but I feel like just in talking to you two, it's especially important when managing large real estate portfolios.

Dustin Toner (10:15)
Yeah, I use the metaphor of like a horse and a jockey. We just had the Kentucky Derby, but align yourself with a partner that's going to be your jockey and they are the best jockey and allow them to go out and find the best horse. The horse would be the carrier in this standpoint. But if you're trying to work with three or four different jockeys, how do you know who's going to perform the best, represent you well in the marketplace and do they have the access to the carriers that somebody like Kate and myself have?

Kate Rahfeldt (10:15)
Agreed. Yeah.

Corey Rekers (10:42)
I would say very rarely in the insurance world, you have a golden tempo situation where you can go from last to first and ⁓ get the outcome that you want in the insurance business. ⁓ guys, obviously the insurance buying process has changed a lot over the last few years. Dustin, you mentioned derecho. ⁓ Would you both say gone are the days of insurance being a much smaller line item on our owners profit and loss statements and

having thousand dollar deductibles. I just have a hard time seeing that happen. What are your thoughts on that, Dustin?

Dustin Toner (11:21)
It's a convoluted marketplace that the landscape has changed so much in the past five years. Most of this is driven by reinsurance and with that you have kind of a double-edged sword. You are looking at much higher deductibles in any loss and you're looking at higher premium. So the insurance carriers are sitting here saying we're going to give you less but we're going to charge you a lot more.

And the biggest concern that I see in the marketplace is when we have a large hail tornado, you know, any convective storm system move through, a lot of the operators haven't experienced a claim with a large wind hail deductible.

So we spend a lot of time educating and talking to our clients about their capital reserves, their cashflow. What does it look like in the event we have a claim and we actually model it out for them ahead of the renewal so that they can be prepared if and when it comes.

Kate Rahfeldt (12:23)
DT, do you want to talk about how you define insurance?

Dustin Toner (12:27)
Yeah, insurance is really three things. There's a gal out of the West Coast that I follow on social media. I completely stole this from her, but it's the most simple explanation. What is insurance? It's access to capital over a contingent period, typically one year at a reduced rate. So when you're talking with a buyer, the first thing they always kind of laugh at is, these aren't reduced rates.

when you lay it out differently to them, well, for $30,000, you can get access to $10 million. That's a pretty good return on your investment if needed.

Is 10 million too much? Is it not enough? Those are the conversations that we have to have. And Corey you had talked about the pressures of insurance, but most of our operators are seeing large tax increases. Their five year arms are coming up due or just came due. Now their debt payments are much higher. So they're looking at a cash crunch from multiple angles and insurance is only one piece of what they're looking at. So where does that fit in? How do we structure the risk in a way that they can continue to

cash flow, hopefully not make capital calls in the event of a loss and continue to grow their business.

Corey Rekers (13:45)
So what I hear from you two is you take more of a holistic approach. You really get in the weeds in trying to figure out where this person is at or where this investment group is at to make sure that you fully understand their entire picture. Am I hearing that right?

Dustin Toner (14:01)
Absolutely. I I joke that we're an extension of the C-suite. Just like your CFO, just like your attorney. A lot of times, again, we're working with real estate professionals, developers, ⁓ asset managers. They approach it more like a banker. We're not, you know, a third party. We're working for you. And then we're finding the third party in our carriers to place your risk with.

There's a lot of conversations. There's a lot of levers that we can pull. And those levers are more important now than ever because of the deductible structures and increases in premium.

Kate Rahfeldt (14:38)
I think ⁓ I'm personally surprised by how many prospects that we find. They don't realize that there's other options in the marketplace. So like Dustin said, we are able to pull a lot of different levers. So for some larger schedules that we work on, they may not want to ensure they're building for full replacement cost. And in many cases, there's a developer ⁓ that's involved that can reconstruct the asset for about 25 % less than what the carrier requires.

And those are just conversations that we have to have. And exactly to DT's point is we see ourselves as an extension of the C-suite. So when you don't have a partner that's working with you like we do, ⁓ you're not going to be having those conversations in different ways to save money and look at some different options.

Corey Rekers (15:27)
Kate, that makes a lot of sense. So at the end of the day, what I'm hearing is you both will take the time, understand what the manager is looking for in their specific situation, and really put that insurance program together based on needs versus simply just looking at a low bid.

So I do have a question though. You two have talked about more of a broad range of real estate. What do you two like to focus on? Do you do HOAs, multi-family units? Are you looking at hospitality with hotels, restaurants, bars? What tends to be where you two like to spend most of your time and energy focusing on? And how are you serving those clients in this very unique marketplace today?

Kate Rahfeldt (16:10)
Yeah, so I think we're seeing that the real estate sector and our vertical, especially within it, is large and honestly endless. I, for myself right now, I'm focused on associations, multifamily, ⁓ hotels, large single-family schedules. Each one of those assets is going to come with its own operational exposures, ownership structures, carrier appetites, claim trends. So this is where specialization becomes really important.

⁓ And as our vertical grows, I think it pushes our team, our growing team, to become more focused and hands on within each niche rather than trying to approach just real estate ⁓ as a whole in a broad category. There are significant opportunities to learn and grow in the space, especially because the market is

consistently evolving and we've seen that over the last five years and a lot in the last year.

Dustin Toner (17:07)
Yeah, I mean, you just go through a couple asset classes, ⁓ take multifamily, have hotel, motel. They're kind of all in the same bucket. These are.

not in high demand from a standpoint as the carriers look at them. A lot of carriers are exiting the marketplace. The reason, they're higher claims frequency. There's litigation risks. There's ⁓ the capacity restraints in the marketplace. ⁓ But on the other end of that, multifamilies growing everywhere.

occupancy rates are very high. So there's a need and there's a desire ⁓ at the ground level, but then people get into that asset and it's like, okay, now what? You flip it over to something like a strip mall, just more standard commercial industrial warehouse. Those are all going to be more contract based where we look at, okay, is this a gross lease? Is it triple net? Who's paying the premium here? Who's responsible for the deductibles?

Five years ago, we weren't having these same conversations because the deductibles were $1,000, $5,000. They were very reasonable where you could have a weather event, you could have a claim. Everything just got fixed and you moved on. Today, those are much larger retention that the carrier or that the clients are taking on. How are they going to manage that?

Corey Rekers (18:26)
Okay.

Dustin, can we hit on that? this is probably the elephant in the room. So with the cat losses over the last few years, huge impact on the insurance carriers, specifically on the reinsurance rates, Not to mention the change in terms, whether it be deductible structure, percentages on when hail deductibles. A lot is happening really, really fast with a lot of your clients.

to it as well with five-year arms coming up. It's a lot of expense, a lot of extra exposure hitting all at the same time. How are you, I

consulting your managers and how to work through that and what are some of the success stories you've had I know you've got some of those that you've shared with me. Can you share that with the listeners?

Dustin Toner (19:11)
Yeah, there's a developer that we work with. has, you know, approaching about 2000 units and he's integrate vertically integrated where he owns the raw land. He's building the buildings and he's then managing the portfolio. He used to use a lot of vinyl siding as we, you know, transitioned in the marketplace. Small hail can impact vinyl siding significantly. It's not expensive.

But at a 1, 2 % wind hail, a roof and vinyl siding, you're basically responsible for the majority of the deductible or the loss in that standpoint. So you're not getting a return on your premium.

He transitioned, I think, to either LP or Hardy Board siding, which is impact resistant. The cost was not that much when you look at the scope of a 20-year hold period on an asset. And he's been able to build better buildings that are viewed differently in the marketplace from underwriters, and that's resulted to a really good program.

Corey Rekers (20:14)
So that situation, you're able to convey that message onto an underwriter and they take that in consideration when assessing the risk, is that correct?

Dustin Toner (20:24)
Yeah, we're doing some modeling right now with a company out of Washington called Brava Tile. And they have impact resistant shingles up to, I believe, two inches of hail. And they're wind rated if you screw down the shingles up to 130 plus miles an hour. They have a warranty.

What does it look like if we make that investment into an asset? We have best in class protection on the roof system. What do we need to do to restructure the insurance program to offset some of those upfront costs and take on a little bit more risk? Those are the conversations that we're constantly having.

Corey Rekers (21:05)
Interesting so it's not just about getting the lowest bid

Dustin Toner (21:09)
It always helps to have the low number, but there's a bigger conversation with the majority of our clients.

Corey Rekers (21:12)
I get it.

So I've heard you talk to me a little bit about ⁓ loss assessment coverage. Can we hit on that a little bit here, what it is and how our clients can benefit from that coverage?

Dustin Toner (21:29)
Yeah, so your loss assessment is going to be on your personal homeowners policy and HO6 policy. So it comes with your personal contents, your liability. It's designed for association risks. So typically you're sharing a roof with your neighbor. ⁓ You have a lot of common ownership in the elements of the association. And we're looking at market rate right now is about three to 5 % on WindHail.

If you have a $20 million facility.

How do you sustain a deductible that is a multiple of what you have in cash reserves? Loss assessment steps in for associations and for a small deductible in a low cost annually. It will cover any ⁓ covered payroll on your insurance policy, the difference of your deductible. So let's say that each unit owner has a $20,000 deductible that they're responsible for. They might have a $1,000 out of pocket deductible

insurance is going to step in and cover the other 19,000. And that's been a way that we can step in and help the associations keep their insurance costs down, take on some of these higher deductibles, and not have to astronomically raise their dues.

Corey Rekers (22:41)
I know you've talked about it quite a bit and we've had a lot of success adding that coverage to folks that own condos and are a part of ⁓ homeowners association. So thanks for taking some time to explain that to our listeners. So guys, as we wrap things up, ⁓ what other advice would you leave our listeners as maybe a takeaway they can use immediately with their own program? Obviously, in addition, just calling you both to take

of it of course, but anything in particular you want to leave our audience with?

Kate Rahfeldt (23:13)
I think short answer for myself, ⁓ if you haven't performed a deep dive into your program with your broker, how do you know if you're best positioned in the marketplace? I think ask a lot of questions. Try to dedicate a few hours at each renewal to educate yourself and just better understand what you're investing in. I think insurance is an investment. So just make sure you're asking questions and getting all the information that you need.

I think also don't wait until the renewal to have that conversation. If your portfolio has changed, if you've added properties, you've changed lenders, you've taken on a new property manager, for example, if your occupancy looks different than it did 12 months ago, that's the moment to get on the phone with your broker and just have those conversations. ⁓ Insurance is as much as people don't like to deal with it, it's not a set it and forget it purchase.

If the risk changes, your program needs to keep up.

Dustin Toner (24:08)
Yeah, that's well said, Kate. I would jump in and say that the majority of the prospects that we have conversations with, the first time you call and you say, insurance, body language changes.

Sometimes it's confusion. Sometimes it's frustration. And, you know, I walk them through the three things. What is insurance to access the capital contingent period for reduced rate? But then I say insurance is an investment. You don't perceive it as an investment because most of the time there's no return on the premiums that you're Secondarily, it's something that's forced on to you typically by a lender.

Well, if we change that mindset, you take a 2000 unit group that's spending a million plus a year in premium, and we say, look, you're investing this premium in the way that you want to. Do you want to take on more risk? Do you want to be able to continue to operate when there's a hail storm? Do we buy down the deductibles? What does that look like? How does it affect the P and L and how does it allow us to continue to grow and achieve your goals as, that portfolio?

portfolio manager. it's surprising, most of these prospects, they're not even presented the options. They're not having these conversations and they may not truly understand, you know, what levers they can pull in the marketplace to better construct an insurance program to meet their needs.

Corey Rekers (25:33)
It makes a lot of sense. First and foremost, Dustin, Kate, ⁓ it's been a real pleasure. You guys have given us a lot to think about.

Obviously, your willingness to share your knowledge and your expertise is truly ⁓ appreciated. So I know they'll find the content really helpful when they're looking at their own portfolio and making sure they're picking the right horse to navigate them through, ⁓ again, a very unpredictable market as of late. with that, I do want to thank you all for listening today. If you found today's episode helpful, please share it. You can learn more about the Accel group at acceladvantage.com

or accelwealthmanagement.com You can also check us out Facebook, LinkedIn, Instagram, TikTok, and YouTube. If you liked today's episode, we'd love to hear from you. So please leave us a review. And finally, make sure to subscribe so you don't miss our next episode. Remember at the Accel Group, we've spent nearly 100 years helping business owners protect what matters most.

Thanks for spending time with us today and we'll see you next time on the Accel Advantage.