What review and analysis of property insurance does your institution require for commercial real estate lending?
Our bank requires an insurance binder as evidence of coverage but does no formal analysis to see that the terms and amounts of coverage are adequate. I am concerned that too little coverage combined with the coinsurance clause may impair the collateral.
The FDIC's examination manual places no emphasis on the issue of adequate insurance coverage on commercial real estate taken as collateral, so perhaps this is a non-issue.
Do other banks also do no analysis of the adequacy of insurance coverage?
My opinions are not legal advice, not my employer's, and may change anytime.