Condo Insurance Across Canada

[whatnext]

This has blown up to become a big thing in Vancouver, but is it elsehwere? Basically strata corporations are finding it impossible or prohibitively expensive to get insurance for their buildings:

Warning of collapse in B.C. condo market
Ross McLaughlin 2018
Published Thursday, February 6, 2020 12:52PM PST
Last Updated Thursday, February 6, 2020 3:48PM PST

VANCOUVER -- There are dire warnings that the condo real estate market in B.C. could collapse unless the province steps in to stop it.

It all has to do with skyrocketing insurance rates. And some condo buildings are unable to get insurance at all, putting owners at risk of losing their financing and being unable to sell their properties.

Zafar Khan had an offer on a Cloverdale condo he was selling, and the deal was to close Feb. 3. But at the last minute it all fell apart, as the buyer pulled out of the sale.

“I found out the strata ran out of insurance,” said Khan.

He said he had no idea, and only learned about it later from the buyer’s real estate agent, Sevin Atilla.

“We found out the strata’s insurance came up for renewal and they were not able to renew it,” said Atilla, who works at Oakwynn Realty.

“I don’t blame the buyer at all,” Khan said.

Banks won’t finance uninsured buildings and that’s what happened with the loan the buyer had secured.

“As soon as they found out there was no insurance in place, they retracted the mortgage approval,” explained Atilla.

CTV News reached out to the property manager, Crossroads Management Ltd. The company said it tried five different insurance brokers, all of which were unable to find an insurance company to insure the complex.

Crossroads said it's still looking.

Owners are now at risk if disaster strikes; their banks could pull their financing and they will be unable to sell their properties...

....And massive insurance premiums are adding to the pressure.

The strata president of one Burnaby condo told CTV News their annual insurance premium has quadrupled, from $200,000 a year to $810,000, and they can no longer afford to pay it.

High premiums coupled with extremely high deductibles are also resulting in massive increases in maintenance fees or special assessments.

“This is not a small number of buildings now. We’re now looking at several hundred buildings throughout the Lower Mainland that are seeing such dramatic increases,” said Gioventu.....

https://bc.ctvnews.ca/warning-of-col...rket-1.4800633

[kwoldtimer]

This is a growing problem (both for the condo corp and for unit owners). I've heard of issues in Ottawa that have obliged owners to accept exceedingly high deductibles.

[whatnext]

Maybe I should have titled this "Skyrocketing Condo Insurance Costs Across Canada" as I'm surprised at the lack of reponse?! IN BC this is being totuted as armageddon for the condo industry, as the premium increases have been so huge.

B.C. condo owners are bracing for sticker shock amid surging insurance rates for their homes.

“Rates are increasing for people in policies now anywhere from 50 to 300 per cent, and deductibles are going from the conventional $10,000 or $25,000 to $100,000, $250,000 or $500,000,” said Tony Gioventu, executive director of the Condominium Home Owners Association.

The reasons for the surging rates are multiple, but one of the factors is the sky-high value of B.C. properties.

Gioventu said in the case of a devastating fire, claims for a large strata building can massive.

“To insure full risk for one building, one building may have a $100 or $200 million dollar value to it, that’s an enormous risk for a single insurer,” he said...

https://globalnews.ca/news/6237709/b...surance-surge/

[WarrenC12]

Originally Posted by whatnext

“To insure full risk for one building, one building may have a $100 or $200 million dollar value to it, that’s an enormous risk for a single insurer,” he said...

That's a bit weird, since total replacement insurance (usually for Earthquakes) is always just to rebuild. they aren't paying for the land, or paying market price for each unit in the building.

Buildings haven't been increasing in value, just land for the most part.

Yes, of course construction costs have increased, but this isn't something that suddenly happened yesterday.

Strata buildings are over a barrel, since they are required by law to be insured. The government will step in at some point, I'm sure.

[megadude]

Fort Mac condo dwellers probably have it the worst.

But ya, it could become problematic across the country for different reasons but in my job experience, AB seems to be where it's hit the hardest right now.

I have to analyse the financials of apartment buildings across the country and for a few properties there have been noticeable jumps in premiums, particularly in AB. The owners told me they had no choice but to pay up or increase their deductibles to something ridiculous. One well known landlord upped his deductible to $1 mil. When we saw that policy we were blown away. We forced him to change it because it goes against the max. allowable under the terms of the mortgage.

Didn't know BC was feeling the crunch too.

When I had a two storey condo in Burlington (built 1999), just before we closed we found out there was a special assessment which would cost all 100 units $900 each. The seller had to pay of course. What happened was that a sink hole started to develop under one of the units as the guy's floor was sagging. The builder had gone out of business so we couldn't sue and you don't want to make insurance claims too often for fear of jacking up your premium come renewal time.

[jlousa]

Not sure why anyone would bring up fire, as Warrenc12 stated the price of land is irrelevant and the building would be rebuilt. The biggest item affecting the industry and premiums is highrises. In a low rise building a water leak (the most common claim? Would only affect a unit or maybe a couple. In a high rise it's not uncommon for a leak to affect dozens of units, add to that the the number of units that are rented out where the renters don't have the same level of care any owner might and where maintenance is more likely to be neglected we are seeing both the number of claims and the scope of them escalate and here we are.

[WarrenC12]

Something has changed this year. Example:

5 year old building. Premiums around $110k, $25k deductible. Year 2 there was a water leak (human error), several units, repair bill was $240k, insurance covered. The premiums only crept up a bit, by year 4 it was around $135k, same deductible.

Now year 5, they are quoted $245k, $100k deductible. Yes there was a claim, but the timing of the claim and the value seem detached from the premium spike.

No other claims on record.

[ssiguy]

Living in a condo and paying strata fees in suburban Vancouver, this could potentially hit me big time. Thankffully I live in a fairly new low-rise so I don't see any major problems arising soon but even if they don't it could definately hurt resale value the older the building gets.

That said, it would be great to see some relief but frankly, I don't see what the government can do. Insurance companies are private companies and are under no obligation to offer insurance to anybody. The ONLY thing I could see the government being able to do is start a public system like ICBC and that opens a new can of worms especially as ICBC is nearly broke as it is.

Bailing out condo owners {whether wealthy or not} would also be a hard political sell. In a city with astronomical rental prices, it would be hard to justify helping out wealthy condo owners when people are being thrown out of their apartments to build new ones and rents already eat up more than 50% of their net income. This is especially true when said condo owners have made a financial killing on their condo if they have had it more than 5 years. How can you morally justify spending massive amounts bailing out relatively wealthy condo owners and yet still claim you don't have enough money to build needed afforable rental stock where the wait list is years even for the most needy?