STRATA INSURANCE PREMIUM CRISIS (2023)
Issue
With insurance rates for condos and townhouses climbing 50 to 300 percent – and in one case nearly 800 percent – condo and townhouse owners in B.C. are worried they will not be able to continue to own their dwellings. This rate increase could impact up to 10,000 associations in the province, according to the Condominium Homeowners Association of BC. Some condo owners in Abbotsford saw their rates jump of 780 percent in one year to their strata or condominium insurance premiums, going from $66,000 in 2019 to $588,000 in 2020. [1]
While this issue affects homeowners, it is important to business, too. A recent Toronto-based report titled “Housing a Generation of Workers” looked at the urgent challenges associated with finding affordable housing. “When a city becomes unaffordable, it forces out key industry workers (or “key workers”), such as cooks, social workers, nurses, tradespeople, childcare workers, and teachers. Without people to fill these jobs, businesses suffer and the city becomes less livable for everyone.” [2]
According to the Royal Bank of Canada, condo living is more affordable than owning a single dwelling home in the same area. For many businesses, their key workers own condos, but with the annual insurance rates matching or exceeding the amount it would cost to live in a smaller, more remote community, it becomes easier for people to move out from cities, making it harder for businesses to find staff.
Background
The condo market is unique when it comes to insurance. In the strata building, all individual unit owners own a proportionate share of the common property. The Strata Property Act requires strata buildings to be insured for full replacement value of all common property, common assets, and fixtures, this helps ensure that all owners’ equity is protected. The insurance valuations are based on recent appraisals.
Strata buildings are insured with a commercial property insurance policy, which is typically used for businesses but modified for strata property because of the ownership structure of the stratas and their commercial-grade systems. Individual unit owners purchase “condo” homeowners’ policy to insure their contents plus any upgrades. Two important coverages are included in these policies: 1) coverage for a portion of the strata building’s deductible in the event of a major claim and 2) liability insurance to cover damages from losses that originate in the unit and extend to the common area or other units. [3]
Over the last decade, these insurance rates have been underpriced and seen very little change in costs. This has been advantageous for the consumer and the strata corporations. In October 2019, the insurance pendulums began a substantial swing back the other way. With a combination of global reinsurance costs rising, natural disasters, an increase in property values, a reduced number of insurers and rising costs for insurance companies, aggressive premium increases are occurring.
Many homeowners and stratas have been refused insurance all together because the market has become so tight, and those who are able to get insurance face massive premium increases they can’t afford. When buildings are unable to get insurance, this leaves the strata and individual condo owners unprotected and at risk of losing their financing. Real estate deals are falling apart because financial institutions won’t touch uninsured buildings.
With premiums skyrocketing and some buildings not able to get insurance, condo owners are put into a very tight position and even the most affordable housing becomes unattainable. When this happens the key industry workers, such as cooks, social workers, nurses, tradespeople, childcare workers, and teachers will be forced to search for more affordable housing in other markets. Ultimately, business suffers because those key workers are not available.
THE CHAMBER RECOMMENDS:
That the Provincial Government:
- Continues working with the BC Chamber network, insurance industry and strata associations to find options to the insurance premium crisis that are available to be able to ease the current pressure that many strata property owners are feeling across the province.