Buyers Stepping Back, Insurance Already Chilling Market

[whatnext]

Originally Posted by SFUVancouver

This strikes me as another "we told you so" moment with respect to the economic costs of climate change: as localized catastrophic natural disasters increase in financial severity and alter actuaries' risk tables, it raises the cost on insurers everywhere due to the skyrocketing cost of reinsurance.

With that said, it is wholly, wholly unsurprising that stratas that systematically under-invest in maintenance and lack sufficient reserves are being hit hardest, up to and included now being uninsurable at any price.

I don't read this as being about climate change as much as it being about water and fire damage to condominiums building through daily wear and tear. Climate change would only be a factor insofar as insurance companies are trying to recoup losses from that area by jacking up premiums in another.

What I would blame is the rapidly escalating values of the buildings they are reapiring and the rise in construction costs. There's an interesting article form an insurance site here:

This has caused quite a flurry of activity and concern among strata and condo corporations, many of whom have gone straight to their insurance brokers and carrier partners to demand answers. Rob de Pruis, director, consumer and industry relations, Western region, Insurance Bureau of Canada (IBC), commented: “Some of the people reaching out to the IBC are not informed about the reasons why they’re seeing some of these big premium increases. Insurance is about risk. Some properties may be viewed as a higher risk due to a number of factors that could include claims history, construction materials, geographic location, and even their repair and maintenance schedule and procedures.”

The reasons for the widespread premium increases are multifaceted. In recent years, the number of claims filed by strata and condominium corporations has increased quite significantly. As multi-unit buildings by nature, when something like a water failure or a kitchen fire occurs within a condo, multiple units are often affected. That means repair costs are often quite substantial, especially with property values and rebuilding costs increasing so significantly.

“There are hundreds of thousands of condominium corporations across Canada, and not all corporations are seeing these huge increases. It’s important to remember that insurance is about risk, and if individual properties are experiencing significant premium increases, there’s usually some very good reasons behind that,” de Pruis told Insurance Business. “It could be things like claims frequency, repair and maintenance procedures and schedules, changes in coverage, and an increase in replacement cost. We have seen a number of areas, especially in BC, where the rebuild costs on these properties have been growing fairly significantly over the last couple of years. With that, anything a corporation and individual unit owners can be doing to reduce their risks and prevent claims is going to be very helpful for them over the long-term.”(bold mine)...

https://www.insurancebusinessmag.com...es-208826.aspx

[misher]

Originally Posted by whatnext

I don't read this as being about climate change as much as it being about water and fire damage to condominiums building through daily wear and tear. Climate change would only be a factor insofar as insurance companies are trying to recoup losses from that area by jacking up premiums in another.

What I would blame is the rapidly escalating values of the buildings they are reapiring and the rise in construction costs. There's an interesting article form an insurance site here:

This has caused quite a flurry of activity and concern among strata and condo corporations, many of whom have gone straight to their insurance brokers and carrier partners to demand answers. Rob de Pruis, director, consumer and industry relations, Western region, Insurance Bureau of Canada (IBC), commented: “Some of the people reaching out to the IBC are not informed about the reasons why they’re seeing some of these big premium increases. Insurance is about risk. Some properties may be viewed as a higher risk due to a number of factors that could include claims history, construction materials, geographic location, and even their repair and maintenance schedule and procedures.”

The reasons for the widespread premium increases are multifaceted. In recent years, the number of claims filed by strata and condominium corporations has increased quite significantly. As multi-unit buildings by nature, when something like a water failure or a kitchen fire occurs within a condo, multiple units are often affected. That means repair costs are often quite substantial, especially with property values and rebuilding costs increasing so significantly.

“There are hundreds of thousands of condominium corporations across Canada, and not all corporations are seeing these huge increases. It’s important to remember that insurance is about risk, and if individual properties are experiencing significant premium increases, there’s usually some very good reasons behind that,” de Pruis told Insurance Business. “It could be things like claims frequency, repair and maintenance procedures and schedules, changes in coverage, and an increase in replacement cost. We have seen a number of areas, especially in BC, where the rebuild costs on these properties have been growing fairly significantly over the last couple of years. With that, anything a corporation and individual unit owners can be doing to reduce their risks and prevent claims is going to be very helpful for them over the long-term.”(bold mine)...

https://www.insurancebusinessmag.com...es-208826.aspx

I work in this industry and I know that most stratas do an awful job. They file a claim whenever it goes over their premium and they do little to mitigate the costs. Whenever there is a leak they hire a restoration company and of course the restoration company is recommending the full restoration. I can often repair things for 50-70% what the restoration company quotes. Because they don't have money to repipe, they instead budget for 4-5 large leaks a year which is insane. You have a volunteer council of people who don't want to be there, advised by the cheapest guy they could get who gets paid crap, works 50 hour workweeks, and has two months of training.

Would you do the below for a 50k annual salary? Councils hire the cheapest person possible who is usually someone regretting his career choice or making money on the side. He has no financial motivation to save the strata money and is usually looking to get out of the industry asap.

Btw I see stratas saying we want the "senior" manager, I hate to break it to you but no building under 100 units gets someone senior, at most they assign a senior agent but get a junior to do all the work. You have half a million+ annual budgets and assets of 200 million+ to look after and instead of looking for the best, stratas look for the cheapest. The industry has gone downhill and its reached the bottom. One large reason for these insurance increases is because buildings are so poorly managed now.

Rancho Junior Property Manager Trainee

Attend 8 evening strata council meetings. [a month]
Draft council meeting minutes.
Work day and evenings
Deal with emergency and be on call on a 24 hours basis.

https://www.ranchovan.com/template.cfm?tID=195

[logicbomb]

This is getting beyond ridiculous. One of my investment properties has proposed a $5,000-25,000 (number to be decided by March) special levy to practically self-insure the property since property insurance companies are no longer going north of $100,000 for coverage. The strata deductable for that place is $500,000. Premiums for the strata has gone up by 214%. Strata fees are slated to up by over 200% for me.

We can see this is going to have a massive ripple effect in the condo market since seniors and pensioners are going to have to sell since they will be unable to keep up with the strata fees and insurance premiums. More new buyers will either be deterred or not meet the qualifications to buy into the condo market. Lastly, no sensible person will even want to rent out their unit anymore since the tenants become a huge liability.

Fully expecting a 40-50% decrease in my property value by the end of the year. Many people are going to be totally sunk here. You have to hope the government intervenes.

[whatnext]

Originally Posted by logicbomb

This is getting beyond ridiculous. One of my investment properties has proposed a $5,000-25,000 (number to be decided by March) special levy to practically self-insure the property since property insurance companies are no longer going north of $100,000 for coverage. The strata deductable for that place is $500,000. Premiums for the strata has gone up by 214%. Strata fees are slated to up by over 200% for me.

We can see this is going to have a massive ripple effect in the condo market since seniors and pensioners are going to have to sell since they will be unable to keep up with the strata fees and insurance premiums. More new buyers will either be deterred or not meet the qualifications to buy into the condo market. Lastly, no sensible person will even want to rent out their unit anymore since the tenants become a huge liability.

Fully expecting a 40-50% decrease in my property value by the end of the year. Many people are going to be totally sunk here. You have to hope the government intervenes.

Yikes! Not much of an "investment" then.

[misher]

Originally Posted by logicbomb

This is getting beyond ridiculous. One of my investment properties has proposed a $5,000-25,000 (number to be decided by March) special levy to practically self-insure the property since property insurance companies are no longer going north of $100,000 for coverage. The strata deductable for that place is $500,000. Premiums for the strata has gone up by 214%. Strata fees are slated to up by over 200% for me.

We can see this is going to have a massive ripple effect in the condo market since seniors and pensioners are going to have to sell since they will be unable to keep up with the strata fees and insurance premiums. More new buyers will either be deterred or not meet the qualifications to buy into the condo market. Lastly, no sensible person will even want to rent out their unit anymore since the tenants become a huge liability.

Fully expecting a 40-50% decrease in my property value by the end of the year. Many people are going to be totally sunk here. You have to hope the government intervenes.

I assume you already have but if not check with BFL.
Also you need to upgrade everything to avoid future leaks.
Some suggestions:
Get braided supply lines on all equipment, a water treatment system, get your stacks flushed, get water/moisture sensors, get your roof coated, get shutdowns in each unit and make sure the owners are familiar with them, caulk the exterior, etc.

I avoid so many leaks in my buildings by being smart, active, and doing the minimal after a leak to get it back in order.

Except for one crazy building where they refuse to listen to me all my buildings have deductibles between 5-20k (yes I managed to keep 5k at some of them) and have experienced increases from 20-50%.

Btw who do you use for management? I assume the cheapest. Its crazy that your losses were so high that your deductibles went up over 100k.

[chowhou]

Originally Posted by logicbomb

You have to hope the government intervenes.

Why should the government subsidize your losses? If the market corrects, the market corrects.

[misher]

Originally Posted by chowhou

Why should the government subsidize your losses? If the market corrects, the market corrects.

The Strata act requires stratas to maintain coverage. Strata councils and the property manager may be personally legally liable if they do not (god bless the volunteers who stay on even though there is that risk and the dumb sucker property manager who probably doesn't realize he may be sued for it), even if they are unable to because insurers cannot get coverage. So either the government changes the Strata act or provides insurance.

Property insurance required for strata corporation
149 (1)The strata corporation must obtain and maintain property insurance on

(a)common property,

(b)common assets,

(c)buildings shown on the strata plan, and

(d)fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot.

(2)For the purposes of subsection (1) (d) and section 152 (b), "fixtures" has the meaning set out in the regulations.

(3)Subsection (1) (d) does not apply to a bare land strata plan.

(4)The property insurance must

(a)be on the basis of full replacement value, and

(b)insure against major perils, as set out in the regulations, and any other perils specified in the bylaws.

Several stratas are now operating illegally in violation of the act and both the council and property manager are liable for this. The property manager has a duty to resign in this situation while the council should resign and allow an administrator to takeover or else they risk being stuck with the hot potato and being held legally responsible. Welcome to how crappy our strata law is.

[logicbomb]

Originally Posted by chowhou

Why should the government subsidize your losses? If the market corrects, the market corrects.

Read up on the strata act. Either legislation changes or they intervene.

Besides, the people I worry about are those pensioners and seniors that are bound to the condo/apartment market. They will either fall behind on their strata payments/special levies or be forced to selling and moving god knows where. We also have an abundance of millennials that have bought into the condo market that will also be falling behind.

IMO, government intervention is required. History is repeating itself...Let's not forget how we got ICBC.

Originally Posted by misher

I assume you already have but if not check with BFL.
Also you need to upgrade everything to avoid future leaks.
Some suggestions:
Get braided supply lines on all equipment, a water treatment system, get your stacks flushed, get water/moisture sensors, get your roof coated, get shutdowns in each unit and make sure the owners are familiar with them, caulk the exterior, etc.

I avoid so many leaks in my buildings by being smart, active, and doing the minimal after a leak to get it back in order.

Except for one crazy building where they refuse to listen to me all my buildings have deductibles between 5-20k (yes I managed to keep 5k at some of them) and have experienced increases from 20-50%.

Btw who do you use for management? I assume the cheapest. Its crazy that your losses were so high that your deductibles went up over 100k.

We use Rancho and BFL for strata insurance. We have done fairly well to mitigate and minimize the hazards and losses in our buildings. We have taken measures and will be introducing bans to A/C units and requesting amendments to introduce mandatory piping and hosing inspections YEARLY.

The biggest reason for the crazy increase is because the development in question is a woodframed 4 story mid-rise. Underwriters have determined mid-rise woodframed buildings pose a huge risk in today market, especially in our region.

[chowhou]

I'm aware of the strata act. If insurance rates go up, perhaps strata fees go up and property values go down. No requirement for the government to intervene.

[whatnext]

Originally Posted by logicbomb

Read up on the strata act. Either legislation changes or they intervene.

Besides, the people I worry about are those pensioners and seniors that are bound to the condo/apartment market. They will either fall behind on their strata payments/special levies or be forced to selling and moving god knows where. We also have an abundance of millennials that have bought into the condo market that will also be falling behind.

IMO, government intervention is required. History is repeating itself...Let's not forget how we got ICBC.




We use Rancho and BFL for strata insurance. We have done fairly well to mitigate and minimize the hazards and losses in our buildings. We have taken measures and will be introducing bans to A/C units and requesting amendments to introduce mandatory piping and hosing inspections YEARLY.

The biggest reason for the crazy increase is because the development in question is a woodframed 4 story mid-rise. Underwriters have determined mid-rise woodframed buildings pose a huge risk in today market, especially in our region.

Which makes you wonder how the insurance world will respond to proposed wood highrises.

[jollyburger]

Originally Posted by whatnext

Which makes you wonder how the insurance world will respond to proposed wood highrises.

I guess if you assume they'll build wood highrises out of 2x4s

[misher]

Originally Posted by logicbomb

We use Rancho and BFL for strata insurance. We have done fairly well to mitigate and minimize the hazards and losses in our buildings. We have taken measures and will be introducing bans to A/C units and requesting amendments to introduce mandatory piping and hosing inspections YEARLY.

The biggest reason for the crazy increase is because the development in question is a woodframed 4 story mid-rise. Underwriters have determined mid-rise woodframed buildings pose a huge risk in today market, especially in our region.

From what I've heard Rancho is decent. A lot of managers though so your always going to get the good and the bad, sounds like your a small building so you likely don't get their best. None of my woodframe buildings have had increases over 50%, even the ones that are less than 10 units and 40+ years old. Then again, I avoid almost all claims in them and we use water treatment systems in all of them to reduce/avoid leaks. You can't "require" braided supply lines but you might as well try since no ones going to bother to go to court over it. I'd strongly recommend buying a strata moisture meter, a lot of leaks below HW baseboards go undetected.

[CanSpice]

Originally Posted by whatnext

Which makes you wonder how the insurance world will respond to proposed wood highrises.

The wood used in those are very much different from the wood used in smaller multi-unit buildings. It's much much less flammable, on par with cement.

[Klazu]

Originally Posted by chowhou

I'm aware of the strata act. If insurance rates go up, perhaps strata fees go up and property values go down. No requirement for the government to intervene.

Yeah, I am also thinking that government should not intervene outside of perhaps patching the Strata Act. Taxpayers should not be on the hook for risks materializing in investment condos that have appreciated hundreds of percents in value in the last decade.

[rofina]

Originally Posted by Klazu

Yeah, I am also thinking that government should not intervene outside of perhaps patching the Strata Act. Taxpayers should not be on the hook for risks materializing in investment condos that have appreciated hundreds of percents in value in the last decade.

I totally appreciate this perspective, and I'm generally anti intervention myself.

That being said, this whole thing makes little sense. The Abbotsford example comes to mind, new building, no claims history, 700% increase in insurance costs requiring a $3000 special assessment just to cover insurance cost increases. And massive, ongoing increases to strata fees.

We live in a City where the majority of residents live in Strata buildings. We are not going back to SFH for everyone, the condo trend will only continue and accelerate as the years move on.

How do we make this work going forward, for renters too. No way landlords are going to be eating strata fees going up 50% or more. I see a lot of variances being applied for to increase rents above inflation, would be justified too when a landlord can show their costs increasing at double digit multiples of inflation.

[s211]

Originally Posted by rofina

I totally appreciate this perspective, and I'm generally anti intervention myself.

That being said, this whole thing makes little sense. The Abbotsford example comes to mind, new building, no claims history, 700% increase in insurance costs requiring a $3000 special assessment just to cover insurance cost increases. And massive, ongoing increases to strata fees.

We live in a City where the majority of residents live in Strata buildings. We are not going back to SFH for everyone, the condo trend will only continue and accelerate as the years move on.

How do we make this work going forward, for renters too. No way landlords are going to be eating strata fees going up 50% or more. I see a lot of variances being applied for to increase rents above inflation, would be justified too when a landlord can show their costs increasing at double digit multiples of inflation.

Next step sounds like an ICBC for condos. Good gawd, I hope not.

[rofina]

Originally Posted by s211

Next step sounds like an ICBC for condos. Good gawd, I hope not.

I'm horrified too. This could make ICBC look like a cake walk, considering the costs involved in condo claims. The only benefit is seldom are there ongoing injury claims, unlike ICBC.

ICBC or a fund of some kind similar to the leaky condo repair fund the government had available at 0% seems like the most likely scenario.

We cant simultaneously be densifying everywhere and expecting most growth to come from condos all the while rendering it impossible to insure these things.

[misher]

Originally Posted by rofina

I'm horrified too. This could make ICBC look like a cake walk, considering the costs involved in condo claims. The only benefit is seldom are there ongoing injury claims, unlike ICBC.

ICBC or a fund of some kind similar to the leaky condo repair fund the government had available at 0% seems like the most likely scenario.

We cant simultaneously be densifying everywhere and expecting most growth to come from condos all the while rendering it impossible to insure these things.

I know stratas whose owners refuse to pay and expect the government to step in to repair them. Gardenia Villa being one of the most famous examples. One of the strata members was arrested and charged for stealing money (they never got it all back), and the owners accused the strata of lying to them when rot was visible so they voted against the levy and water continued to leak in which more than tripled the repair costs. This demonstrates two of the biggest faults of the strata act, it gives the council too much power over the stratas funds such that its not difficult to rob the strata, and it allows owners to be idiots.


https://condomadness.info/decline-Gardenia-Villa.html

[rofina]

Originally Posted by misher

I know stratas whose owners refuse to pay and expect the government to step in to repair them. Gardenia Villa being one of the most famous examples. One of the strata members was arrested and charged for stealing money (they never got it all back), and the owners accused the strata of lying to them when rot was visible so they voted against the levy and water continued to leak in which more than tripled the repair costs. This demonstrates two of the biggest faults of the strata act, it gives the council too much power over the stratas funds such that its not difficult to rob the strata, and it allows owners to be idiots.


https://condomadness.info/decline-Gardenia-Villa.html

Agreed, its a mess.

Hopefully the market rewards well managed buildings. It should now more than ever.

[misher]

Originally Posted by rofina

Agreed, its a mess.

Hopefully the market rewards well managed buildings. It should now more than ever.

And then a new council comes on and decides to cut costs by hiring a cheaper manager or their friend. Or just punish the past manager that fined them on the orders of the last council. Whenever someone gets fined or charged something they join council to punish the manager for doing it.