California, home to some of the country's largest cities, is soon likely to face a staggering rise in rents and insurance premiums due to the impact of the Los Angeles wildfires, which only fans the flames of the affordable housing crisis in the city.

Affordable housing is an industry that already has razor-thin margins, and variable costs like insurance can make things even more difficult for housing providers. To help combat this disparity in the market, PCH Specialty Programs, an underwriting company founded in 2021, provides competitive property insurance to the affordable housing industry.

For nearly four years, the company has been diligently working behind the scenes to develop a property insurance product for multifamily properties that will launch next month, focusing on the affordable housing sector.

The company believes that the future of insurance is participatory — meaning it will be about more than just delivering policies, but also about driving down costs by deploying best practices to create viability in the affordable housing insurance market, PCH Specialty CEO Gregory Hughes said.

“Our instincts were that the affordable housing industry had unfairly received a negative reputation from the underwriting community,” Hughes said. “We built an actuarial model to see if that reputation was justified, and we determined that there was an opportunity to provide something innovative and more competitive.”

The company has created a program to help manage pre- and postloss risk in the affordable housing insurance space. Preloss refers to implementing preventive measures before something catastrophic can occur — such as property damage from climate events — and the potential costs associated with those issues. Postloss is the aftermath of such an event — the damages, reputation of the property/business and the ability to operate. In more serious cases, units may not be replaced, depending on the damage done.

“We have a deep proprietary tech stack, specialized underwriting tools, underwriters with enormous experience in habitational property underwriting, data-enabled workflows and a proprietary risk-scoring system that will enable us to mitigate risk in a way that works for all of our policyholders,” Hughes said.

With more than two decades of experience in risk management and insurance services, Hughes has easily navigated the preloss side of the equation. He said that when it comes to preloss, the company worked with construction consultants in the multifamily space to develop best practices, and he has been pleased to discover that many affordable housing providers are already utilizing these practices.

“On the postloss side, our program is unique in that we have a designated national general contractor who will estimate the cost of losses and either fully remediate or supervise those who do,” he said. “Our ability to source materials nationally at a discount and perform work with a contractor whose interest is aligned with the property owner and the insurance program provider will generate substantial savings.”

He said the company has data to suggest that by using its system, large remediation projects can be completed for less than 30% of the current market rate.

While the company plans to underwrite nationally, it is currently focused on California and the West Coast. Hughes said that PCH Specialty wants to create more positive outcomes by being more hands-on in the affordable housing market.

“If we can bend the curve on the underlying cost drivers, we will create some positive interest in this segment of the market,” he said.

For more information, contact Greg Hughes at gh@pchspecialty.com.

This article was produced in collaboration between PCH Specialty Programs and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.