The tropical storms that have devastated areas of the Caribbean, Texas, and Florida are affecting the US mortgage commercial mortgage market, a September 2017 FT.com article has suggested.
Many of the buildings in the path of Hurricane Irma have been used as security for mortgage loans. Though businesses have insured their property, not all policies cover hurricanes unless they specify this cover. This could mean difficulty in keeping up with commercial mortgage repayments.
The storms highlight the need for adequate insurance for British businesses. While Britain does not experience major hurricanes, there are many areas where property could be flooded, or subjected to strong winds.
When a building is damaged by a natural disaster, it can result in the business ceasing trading until the building has been repaired. The contents of the building should also be taken into consideration, such as the stock, computers and other equipment that needs replacing before the business can commence trading.
If the business is receiving no income, the commercial mortgage repayments are still due. If these payments cannot be met then the property used as security is at risk.
Loss of business insurance will provide money if a business cannot trade after a natural disaster. This should be enough to meet the mortgage payments.
Lenders often insist that a business takes out insurance as a condition of arranging a commercial mortgage, but this may require a minimum amount of coverage. It is up to the business owner to make sure that they are fully covered so that they can recover their business after a natural disaster.