Why has there recently been an increased demand for appraisals from insurance carriers?
The tremendous property losses resulting from Hurricane Katrina highlighted the fact that many of the insured properties were scheduled as having values well below what would normally be considered a true replacement cost under normal circumstances. Add the increase in costs associated with the demand surge following the hurricane and resultant flooding, and the carriers were paying out multiples of what they expected to pay to replace these undervalued buildings. Many carriers now require independent verification of building values as a condition to binding coverage. What is demand surge, and how does this impact values? Demand surge is essentially post-event inflation. After a disaster affecting a large number of buildings, as insurance dollars roll in for reconstruction, there is much demand for limited construction materials and labor. This drives up building reconstruction costs. The greater the number of buildings affected, the larger the total economic impact and the greater the
