HEIC Helps Affordable Housing Owners Protect Their Investment

PRODUCT: Endorsement for loss of low-income tax credits

COMPANY: Housing Enterprise Insurance Company, part of the HAI Group

BEST RATING: A (Excellent)

AVAILABILITY: Coverage is available through appointed agents.

FOCUS: In 1986, the federal low-income housing tax credit (LIHTC) was created to finance affordable housing development. But while the National Equity Fund, a national syndicator of low-income housing tax credits, reports that the LIHTC has helped fund more than 2.7 million new homes for low-income families, the formerly homeless, the elderly, the mentally handicapped and others with special needs, it’s not a foolproof solution.

“Problems develop when owners of low-income housing tax credit properties sustain physical damage to their property, which opens the door for a loss of the tax credit while these buildings are out of service,” explains Jerry Williams, senior vice president, Insurance Operations at HAI Group.

And because tax credits are vital to the financial health of properties, losing them can result in significant financial and reputational damage to an organization—which is why the Housing Enterprise Insurance Company (HEIC) has developed coverage for loss of low-income tax credits.

“Currently, standard insurance policies do not provide security for this exposure, and most developers do not offer protection for owners,” Williams says. The LIHTC endorsement is available for owners, general partners and limited partners to insure the portion of their overall tax credit award subject to risk.

UNDERWRITING: HEIC requires tax credit by building, verification of financial statements and verification of no outstanding criminal investigation. The company prefers customers that have earned a Tax Credit Compliance certification.

HEIC can endorse a permanent property insurance policy for all eligible buildings, and calculates limits based on the building’s annual taxpayer credit. This includes the loss sustained due to covered physical loss to buildings that prevents property owners from qualifying for tax credits following the restoration period. The policy covers changes in local law that prevent or delay restoration following a covered loss.

This endorsement redefines standard business income coverage—earnings and rental income—to include loss of tax credits. Limits are based on the dollar figure reported to the Internal Revenue Service for each eligible building for that calendar year. This is not a standalone policy but an optional endorsement to the standard property policy available to customers.

MINIMUM PREMIUM: None.

TARGET: Affordable housing owners and operators.

COVERAGE TERRITORY: All U.S. states except Alaska and Hawaii.

CONTACT: Roque Orts, director, marketing and agency operations; HAI Group, 189 Commerce Court, Cheshire, CT 06410; 800-873-0242, ext. 233.

Ronimarie Acord is an IA contributor.