Replacement value cost trends - Risk Engineering

Zurich is committed to providing experience and insights to help customersand producers better understand and prepare for the evolving risks theyface over time. This issue of Zurich’s replacement value cost trends providesthe results of the most recent real and personal property inflation surveyconducted by Zurich. The cost trends are published to assist in maintainingproper levels of insurable replacement costs for commercial and industrialproperties. The cost trends are issued bi-annually in January and July.January 2013 cost trends analysisThe current building construction cost trendsshow an average cost increase of less than 1% forthe six months ending January 2013. This smallchange reflects modest labor cost increases andmixed but overall low material cost increases asthe worldwide economic slump continues. Theconstruction market has stabilized somewhat andthere are pockets of encouraging constructionactivity. Labor costs are the primary driver in thecurrent inflation rate. Material prices continueto rise and fall back on a regular basis butoverall remain somewhat stable. Constructionunemployment remains high.The personal property cost trends indicateoverall percentage increases in machinery andequipment costs for the listed plant occupancies.The most recent survey of machinery andequipment costs showed costs remained flat forthe last 6-month period. It is anticipated the rateof increase will be about the same over the nextsix-month period.Real propertyInflation multipliers are provided for all 50states, Puerto Rico and eight Canadianprovinces. In all, cost trends are included for184 cities. Prior to 2007, the cost trends areavailable on a regional basis.To determine the current replacement cost ofa building, select the closest city from Zurich’sreplacement value cost trends. Find the dateacross the top of the page that corresponds tothe last time the existing values were updated.Scroll down the page to the closest city and notethe multiplier. Multiply the factor provided by theexisting estimated replacement cost to arrive atthe current estimated replacement cost.Personal propertyThe personal property cost trends are calculatedby use of a weighted index and include aninstallation factor.For personal property, choose the occupancy andscroll down the page to the date closest to whenthe existing values were updated or establishedand note the multiplier. Then apply theappropriate multiplier to the existing personalproperty values to approximate the currentreplacement cost.Cost trends are also available in pdf format on www.zurichna.com