Insurance valuations have long been a core element of placing property risks, allowing underwriters to assess exposure, risk managers to test scenarios, and claims handlers to honour the promises made in the policy.
However, over time, the methods used to produce insurance valuations have changed. A drive for speed, consistency and efficiency over engineering-led judgement has influenced the approach of many valuers, even when assessing industrial and energy assets. The result is a growing disconnect between declared values and the realities of reinstatement, with implications that extend well beyond the headline sum insured.
This paper explores how the profession arrived at this point, and why the distinction between what Kroll describes as ‘Basic’ and ‘Expert’ valuation methods has become so important. While the two approaches can appear similar on the surface, they produce fundamentally different outcomes when values are used to support underwriting decisions, Estimated Maximum Loss (EML) and Probable Maximum Loss (PML) analysis, and claims settlement.
Sitting at the center of that difference, is the role of engineering-led expertise. Accurate insurance valuations depend on understanding how assets are designed, constructed, modified and operated, as well as spending sufficient time on site to verify what is actually there. Without that grounding, values risk being built on partial information, historical data or assumptions that do not hold up to scrutiny when a loss occurs.
As assets become more complex and scrutiny of declared values increases, the margin for error narrows. Getting valuations right is not simply a technical exercise – it plays a fundamental role in ensuring the right cover is in place, for the right risks, at the right time. This paper sets out why an expert, engineering-led approach remains the best way to achieve that level of confidence.
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