What commercial property insurance covers

The policy protects a company's physical assets against destruction, damage and loss. You can insure buildings and structures, premises and fit-out, production and office equipment, furniture, computers, goods in the warehouse and on the shop floor, raw materials and stock, as well as property held in custody, rented or leased.

The contract follows one of two models:

  • Named perils — the insurer pays only for events expressly listed in the policy: fire, lightning, gas explosion, water damage from utility systems, natural disasters, unlawful acts of third parties (burglary, robbery, malicious damage), falling aircraft, vehicle impact, glass breakage.
  • All risks — any sudden and unforeseen event is covered except those expressly excluded. This model is broader and more expensive; the exclusions section is the first thing to read.

You can also separately insure machinery breakdown (internal causes such as a short circuit, operator error or a mechanical defect), electronic equipment and business interruption — loss of profit and continuing expenses during the restoration period after covered damage. Under Article 933 of the Russian Civil Code, business risk may be insured only for the benefit of the policyholder itself.

Who needs it

  • Owners of commercial real estate, warehouses, shopping centres and production facilities.
  • Tenants — for fit-out, equipment and goods, and where the lease requires the premises to be insured.
  • Borrowers: banks generally require insurance of property pledged as collateral.
  • Lessees — leasing terms usually provide for insurance of the leased asset.
  • Trading and logistics companies holding large inventories.

The law and counterparty requirements

Insurance of corporate property in Russia is voluntary; the general rules are set by Chapter 48 of the Civil Code and Russian Federation Law No. 4015-1 "On the Organisation of Insurance Business in the Russian Federation". Several Civil Code provisions directly affect the payout:

  • property may be insured only by someone with an interest in preserving it (Art. 930) — an owner, tenant, custodian or pledgee;
  • the sum insured may not exceed the actual (insurable) value of the property (Art. 947), and over-insurance is void to the extent of the excess (Art. 951);
  • in the case of under-insurance, the payout is proportional to the ratio of the sum insured to the value, unless the contract provides otherwise (Art. 949);
  • an increase in risk — a change of business activity, an alarm being disconnected — must be reported to the insurer (Art. 959);
  • the insurer must be notified of an insured event within the time limit and in the manner set by the contract (Art. 961), and reasonable steps must be taken to reduce the loss (Art. 962).

In practice, the obligation to insure property most often arises from contracts: loan agreements (collateral), leasing and lease agreements, and contracts under Federal Laws 44-FZ and 223-FZ (Russia's public and state-company procurement laws), where the customer hands its property to the contractor or requires the result of the work to be insured.

What drives the price

  • Type of business and fire hazard: an office, a warehouse and a plant handling combustible materials are rated differently.
  • Building construction, wall and floor materials, year built, condition of utility networks.
  • Protection: automatic fire alarm and sprinklers, security guards, CCTV, window bars.
  • Sum insured and scope of risks — all risks costs more than named perils.
  • Deductible: the higher it is, the lower the premium.
  • Loss history over recent years.

For a preliminary estimate you can use the calculator, but the insurer sets the exact rate after a questionnaire and, for large sites, after an inspection (Article 945 of the Civil Code gives it that right).

How to set the sum insured

For buildings and equipment, insurers usually use replacement value (the cost of restoring the asset or buying a new equivalent) or actual value after depreciation. Book value often differs greatly from market value, so an independent valuation is useful for large assets. Inventories are insured at cost; if stock levels are seasonal, a contract with a limit on the maximum stock or with monthly stock declarations is a good fit.

How to choose an insurer

  • Make sure the company holds a valid Bank of Russia licence for property insurance.
  • Compare not only the price but also the policy wording: exclusions, security requirements, payment deadlines.
  • For large risks, ask how the insurer places them in reinsurance — it affects the reliability of the payout.
  • See company profiles in the insurer directory.

Claims handling

  1. Take steps to save the property and reduce the damage; call the relevant services (the Emergencies Ministry, police, utility emergency service).
  2. Notify the insurer within the time limit set by the contract and do not alter the scene without its consent, except for safety measures.
  3. Obtain documents from the authorities: a fire report, a decision to open or to refuse to open a criminal case, a building management company's report on water damage.
  4. Prepare proof of title to the property and of its value: accounting records, inventory lists, supply contracts.
  5. Agree the amount of loss and the repair estimate with the insurer or a loss adjuster.

If the payment is delayed or reduced, first send the insurer a written claim, then go to the commercial (arbitrazh) court. The financial ombudsman handles complaints from individuals only.

Common mistakes

  • Understating the sum insured to save money — the payout will be cut proportionally.
  • A wrong address or incomplete list of premises: property outside the stated location is not insured.
  • Failure to meet the contract's security and alarm requirements — grounds for a refusal or a reduced payout.
  • Assuming the policy covers downtime: business interruption must be added separately.
  • Failing to notify the insurer of a change in risk — a new activity, a warehouse move, a disconnected alarm.

Related types: general liability insurance, cargo insurance, construction and erection all risks. Polis Re specialists can collect offers from several insurers — submit a request.