What Insurance Review Actually Looks Like at Most Lending Consultancies
I used to work at a lending consultancy.
Our job was to review the insurance coverage on commercial closings, acquisitions and refinances, on behalf of lenders. We would collect TIVs, business income limits, FF&E, flood and wind zone exposure, and earthquake zones. We would verify AM Best ratings, check carrier eligibility, run congestion analyses for companies with assets in close proximity, and confirm the limits met the lender's requirements. Then we would collect the COI, write a tidy summary, sign off, and collect five figures per deal closed.
But we never read the policy. Not once.
We were actively discouraged from doing so. At one point my line director described policy review as a "dead end." In his defense, the deal volume made it impossible. The certificate was the finish line and everyone knew it, including the lenders.
Why Lenders Demand More, and Get Less
What I suspected then and have since confirmed is that lenders knew the policy review was not happening. Their response was not to demand better review. It was to increase the limits as a substitute for actually knowing whether the coverage existed.
I recently had the opportunity to benchmark insurance requirements across roughly 70 commercial deals, spanning the largest institutional lenders down to regional and mid-sized banks. The gap is the reason I am writing this article.
The Benchmarking Findings
Per deal, the largest institutional lenders were consistently requiring:
- Six additional months of business income coverage over the rest of the market
- Several million in additional umbrella liability
- Additional excess flood coverage
- More restrictive AM Best rating thresholds
The premium increases were punishing, especially if an asset sat in a rent-controlled environment. Roughly 3% premium increase per line for the items above was typical.
What the Policies Behind the Certificates Actually Contained
When I opened the policies behind the certificates, I found the same exclusions littered throughout the seven-figure premiums as I did with mid-market policies placed by a local broker. Bigger numbers did not equate to better coverage.
- Total residential exclusions on habitational accounts appeared in more than 1 out of 2 placements
- Mixed-use operation exclusions were standard, creating gaps the certificate could not disclose
- Endorsement creep: manuscript carve-outs that appeared in year two and remained quietly through every renewal
The lender got the certificate they required because it passed internal audits. But if you are a bank, what matters more? Compliance with a requirement, or an asset defaulting because of an uncovered claim?
Why Lender Insurance Requirements Keep Increasing
When you cannot verify what a policy covers, the only lever left is the number on the certificate. So lenders pull that lever harder every year. Limits go up, AM Best thresholds tighten, additional excess layers get stacked, and the borrower pays a premium increase for coverage nobody confirmed actually exists.
This is a regulatory and credit-risk feedback loop driven by a single missing capability: nobody is reading the policy. The certificate is a summary of intent. The policy is the contract. The two diverge at the exact endorsements that matter for an uncovered loss.
The New Capability for Lenders
Today, AI can review a 200-page commercial policy in roughly the time it takes a human to review the COI sitting on top of it. The time excuse is gone.
You do not have to be a coverage expert to know where to look. Open the Schedule of Forms. If you see words like "Limitation," "Total Exclusion," or "Absolute," that is your red flag. Someone at your organization knows whether that is a problem. And if they are not always in the room, there are tools that scale that expertise across every deal in your pipeline.
RiskRemedy is built for the lender, the lending consultant, and the brokerage that recognize the certificate was never the protection. The policy was. It always has been.
The Lesson
- Bigger limits are not better coverage. They are a proxy for what nobody verified.
- The certificate cannot disclose the exclusion that defaults your asset. Only the policy can.
- Time is no longer the excuse. Reading the policy now takes the same minutes as reading the COI.