2018 was the 4th costliest year for insurers according to the reinsurance giant, Munich Re. Toppling 80 billion dollars in insured losses (primarily resulting from natural disasters), the financial impact to insurers is one major cause of the recent condo insurance crisis. With rates skyrocketing and some buildings struggling to find any insurance at all, REALTORS® must stay informed to protect their clients from financial hardship during these uncertain times.
Here’s a rundown of the cause of the insurance crisis, who’s being affected, the difference between building versus content insurance, and what every REALTOR® must do to protect their client.
The Reason for the Rising Rates
Put simply, the wide-spread financial loss has left the condo insurance industry unprofitable and unappealing. Along with natural disasters, insurers face other considerations like the increased cost of rebuilding, high property values, and increased claims in general.
The Risk to Homeowners
In regards to condo insurance, homeowners face a multitude of problems. Rates are rising with some buildings seeing increases as big as 50 to 400 percent. And, while some buildings struggle to find any insurance at all (at incredibly serious risk), homeowners will also struggle for mortgage renewals with nearly all lenders requiring insurance as a condition of their mortgage.
Which Buildings Are Affected
Buildings most impacted are new high-rises, large resort complexes, any strata with more than 300 units and buildings that have not been well maintained.
BCREA & Government Intervention
This condo insurance crisis is no doubt uncharted territory for most British Columbia’s. With insurance operating like any business (forging towards profit and away from loss), it’s abundantly clear that insurance is not a mandatory service. Recognizing the seriousness of the crisis, the government has already said that they, will “do what they can”. And, while government intervention is necessary, it’s unlikely to unfold in a timely fashion.
In the interim, REALTORS® are left scrambling with protecting the interest of their clients. BCREA recommends three ways to help protect your clients.
1. Discuss Insurance With Your Buyer
2. Review and Ask for Strata Corporation Insurance Documents by using the new BCREA strata insurance clause (see more below)
3. Seek Professional Advice.
To help request insurance documents, BCREA introduced a new insurance clause on February 18, 2020. Found on Webforms, REALTORS® can insert the following insurance clause to better protect their clients.
Subject to: (A) the Buyer reviewing and approving the terms and rates of the strata corporation’s insurance, including the premium amounts, deductible amounts, and coverage limits thereunder and the date of expiration of such policy or policies; and (B) the Buyer confirming the Buyer’s ability to obtain personal strata owner insurance on terms satisfactory to the Buyer, including coverage for any owner’s portions of deductibles payable under the strata corporation’s insurance, in each case on or before ________________. These conditions are for the sole benefit of the Buyer.
Immediately upon execution and delivery of this Contract of Purchase and Sale by all parties, the Seller or the Seller’s agent, will obtain copies of the strata corporation insurance policy or policies, or a summary of coverages, a cover note or a binder in respect of same, and will immediately, upon receipt, deliver such document(s) or cause such document(s) to be delivered to the Buyer or the Buyer’s agent.
See below for further reading regarding BC’s Condo Insurance Crisis.