The Value of a Property Appraisal

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1 The Value of a Property Appraisal Craig Derrick, Senior Manager American Appraisal Jennifer A. Kolbasinski, Operations Manager TAC Risk Management Services

2 Welcome! The TAC RMP has partnered with American Appraisal to provide: Physical appraisals Yearly value trending

3 Property Appraisal Benefits The development of a structured property appraisal program represents a quality assurance process for the Member and the property underwriting function. Completeness of property listing Accuracy of property values Improved risk management Improved marketability to Reinsurers

4 American Appraisal We have never strayed from our founding principles and approach each client interaction with the utmost integrity. Established in 1896 to provide independent property valuations for use in adjustments and settlements between insurance companies and property owners Global valuation consulting company with over 850 professionals in more than 49 offices in 25 countries Professionals dedicated to serving private sector industries and public entities Fully Independent and free from all SEC restrictions Adherence to recognized professional valuation standards

5 Appraisal Schedule Last Appraised (57 members / 17 new COMPLETED) Last Appraised (41 members in progress) Last Appraised /2016 (42 members) Last Appraised 2012 & (21 members)

6 Appraisals Completed As of April 2015 Over 1,800 Buildings 566 Site Improvements

7 TAC RMP Property Program Blanket Coverage Replacement Cost (CRN) Cost of Reproduction New is defined as the estimated amount required to reproduce a duplicate or a replica of the entire property at one time, in like kind and materials, in accordance with current market prices for materials, labor, and manufactured equipment; contracts overhead and profit; and fees, but without provision for overtime, bonuses for labor, or premiums for material or equipment. Historic Valuations

8 Valuation Methodology Cost Approach Establishes value based on the cost of reproducing or replacing the asset. Market Approach Measures the value of an asset through an analysis of recent sales or offerings of comparable assets. Income Approach Measures the value of an asset by the present value of its future economic benefits.

9 TAC RMP Valuations Cost Approach Establishes value based on the cost of reproducing or replacing the asset.

10 Building Appraisal Approach Component Based Approach Inspection and recognition of the design and components of construction and their related costs in order to compile the aggregate cost of the structure

11 Content Modeling Approach Content Modeling Approach Represents an estimate based on the extent of equipment observed during the inspection of a building and the related square feet of space based on certain models developed from physical inventories equipment at buildings with similar occupancies

12 COPE Construction Occupancy Protection Exposure

13 Standard COPE Elements Description Address Class of Construction Year of Construction Square Feet of Space Number of Stories Average Story Height Wall Construction Roof Construction Heating System Cooling System Fire Alarm Sprinklers Entry Alarm GPS Coordinates

14 Secondary COPE Elements Construction Quality Roof Covering & Geometry Roof Age/Condition Roof Anchor & Equipment Bracing Basement Appurtenant Structures Cladding Type Roof Sheeting Attachment Frame/Foundation Attachment Ground-level Equipment Opening Protection Flashing & Coping Content Grade Flood Zone Determination RMS-specific Construction Codes RMS-specific Occupancy Codes

15 Physical Inspection Inspect of each building (tour of premises) Identify of various components of construction (structure, walls, roof etc.) Recognize major service systems (electrical, plumbing, HVAC, security, etc.) Measure the square feet of space or research blueprints Photograph the buildings Estimate cost by major components of construction

16 Site Improvements Outdoor lighting Fuel tanks Fencing/Railing Covered walkways Signage

17 Appraisal Reports Summary appraisal report Statement of values Building detail report Comparison report

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21 Why Appraisals Matter No surprises Buildings change Material costs change Reduce costs to the Member Reduce costs to the Pool Fiscal responsibility

22 Reporting Responsibilities Add new or purchased buildings Delete sold or demolished buildings Contents Site improvements - cumulative per site Update building construction elements - only those with significant additions

23 Required Building Information Building name Building site Building address Building value # of stories Building contents Effective date NOTE: Fine Arts are not appraised!

24 Excluding Buildings Considerations Coverage is Occurrence Based Requires signature Blanket Coverage Debris removal costs No contents coverage Cost vs. Value

25 Transaction History Reviewed daily Changes made identify user, date and time Transaction log can be exported into Excel

26 Summary Benefits Improved risk management Standards Uniform Standards of Professional Appraisal Practice (USPAP) Scope of Services Full scope appraisal Reports Narrative (scope, approach and methodology) and detail Multiple Year Approach Members scheduled geographically over four year cycle

27 What is the TRUE value of a Property Appraisal?

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30 Questions? Jennifer A. Kolbasinski TAC RMS Operations Manager ext

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