Why are strata building insurance rates rising 25- 300%?
The Strata Property Act Part 9 requires strata buildings to be insured for full replacement value of all common property, common assets, and fixtures.
Similar to lending rates, insurance companies are reacting to market forces and global disasters.
- Claims have increased in number, which hikes costs and premiums
- The cost of rebuilding has increased
- Property values remain high in BC and across Canada
- Extreme weather events globally have cost insurance companies more in payouts
Reinsurers are companies that underwrite smaller insurance companies to cover catastrophic losses from extreme weather events around the world. As reported by Munich Re, the world’s largest reinsurance company, 2018 was the 4th costliest year since 1980 for insured losses. And 2017, with hurricanes Harvey, Irma and Maria, was the costliest. With major weather-related payouts occurring annually, companies are incorporating that risk into pricing.
When the smaller companies are faced with huge increases in their costs from Reinsurers, they either pass them on or, as is happening now, are choosing to leaving the business of strata coverage to the larger firms.
Less competition = higher rates.
In BC, high rates could also be a combination of an increasing number of aging strata buildings and / or a reluctance on the part of strata owners to pay for major system upgrades increasing the likelihood of failures and repairs.
Here is a link from the Insurance Brokers’ Association of BC listing ways a strata can reduce insurance premiums; reduce insurance rates.
What do Condo Owners have to be aware of?
Many strata owners do not know they may be personally liable to reimburse their strata corporation for its insurance deductible.
As has always been the case, if your toilet overflows, your dishwasher leaks or washing machine spills over and it leaks into the unit below you, YOU are responsible for repairing that damage. Typically, a strata will have the damage repaired and then come after the unit/owner responsible to cover the cost of their deductible.
If a backed up toilet caused by your 3 year old stuffing Barbie into the bowl causes $40,000 damage to the apartment below you and the strata’s deductible is $25,000 – you will be liable for that $25,000 (typically paid for by your insurance co.). The Strata complex’s insurance will cover the other $15,000.
Most apartments I have sold recently have only had a 25-30% rise in insurance premiums but this has usually been in conjunction with an increase in the deductible amounts as well.
Please be sure you monitor these changes at your next Annual General Meeting and modify your Homeowner’s policy to cover these changes.
If you are buying an Apartment or townhome now?
You must check the insurance coverage and deductibles on the complex you are considering buying AND make sure your own homeowner’s insurance will cover not only damage to your unit but also your strata’s deductible in the event you are held responsible for damage to another unit or common areas.
If you have questions or concerns, I may be able to find the answer for you.