Multifamily Landlords Create Their Own Insurance Company to Fight Rising Costs

The Milford Street Association Captive Insurance Company has officially launched, marking a significant development as the first captive insurance company in the United States specifically designed for affordable housing.

Rising Insurance Costs for Multifamily Owners

Multifamily property owners have been struggling with steep increases in insurance costs. According to a March report by the New York Housing Conference, the average cost to insure an affordable apartment surged to $1,770 in 2023, a dramatic 103% increase from the $869 average premium four years ago.

Addressing the Insurance Market Crisis

Susan Camerata, CFO of Wavecrest Management, expressed the industry's frustration, stating that the escalating costs were untenable. "It just became so unpalatable. Where do you get the money to pay for that?" Camerata emphasized the need for an alternative solution rather than passively accepting the situation, saying, "We couldn’t just sit by and let the insurance market take us over, because it will take us down."

Ownership and Membership Criteria

The new insurance company is collectively owned by its premium payers, which include organizations like Wavecrest Management and Workforce Housing Group. Membership is restricted to residential rental buildings with regulatory agreements that limit rents and receive public financing.

Benefits and Limitations of the Collective

While the collective ownership model provides members with better control over costs and insurance availability, its impact is limited. The Community Housing Improvement Program, a landlord group, has advocated for a state-backed insurance provider to cover a broader range of rental buildings. Although the state budget this year included legislation preventing insurance companies from denying coverage to affordable housing providers, it did not establish its own insurance solution.