Condominium and Strata Insurance 2018-2019 Outlook

Clients often ask how much they should be budgeting for their upcoming insurance renewal. Here are a few factors to consider when budgeting for your insurance in 2019.

Insured Value Increases

Current reconstruction appraisals are 7 – 15% higher than the prior year and we expect this to continue in 2019. These increases are mainly due to higher costs for softwood lumber and an increase in minimum wage for labour.

This means you should expect on average a 10% increase strictly due to the higher value being insured. Property insurance is priced based on a cost per $100 of coverage so if the reconstruction value increases, so does the premium.

Insurance Market Outlook

The increase in catastrophic losses from weather related incidents continues to be the largest challenge for insurers. If current trends continue, and climate change suggests that it will, we will continue to see significant natural catastrophic losses in 2019.

2017 was one of the costliest years for insurers and reinsurers, due in large part to Hurricanes Harvey, Irma and Maria, earthquakes in Mexico, and wildfires. Close to US$100 Billion in insured losses arose from these natural catastrophes. Due to the globally connected economy and reinsurance market, these losses also impact the Canadian insurance market.

Speaking of Canada, 2018 has seen its share of natural catastrophes. Between the summer storms in the Prairies and the tornado, wind and rain storms in Ontario, insurers have paid over $1.4 Billion in severe weather related losses. Add to this the continued deterioration of loss experience specifically for Condominiums and apartment buildings resulting from high frequency and increasing payouts for water damage.

In the past few years, there has been a higher frequency of fire losses, mainly in condominium apartment buildings, resulting from improperly discarded cigarettes, candles and cooking. These losses are generally quite severe and can take upwards of 2+ years for reconstruction.

As a result, insurers were looking for an average of 3 – 5% increase in rating in 2018, and we anticipate an average of 10 – 15% increases in 2019.

We are already seeing a stricter underwriting philosophy, whereby properties with claims frequency, severity or both will see deductibles increase and higher rating increases then they have seen in the past.

Collectively, between the insured value increase and rate increases, you should budget for a 20% increase in insurance costs for 2019, possibly higher if your property has suffered losses.

Control Rising Insurance Premiums

There are a number of things that Strata and Condominium Corporations can do to control their insurance costs.

• Regular and preventative maintenance is important to reducing exposure to loss.               
• Building Updates: Roof, Plumbing, Electrical and Heating
  • Tell us if any updates have been done, especially on buildings over 25 years old.            
  • Insurers will provide a more favorable rating and deductibles if they know you are being proactive.

• Water Damage Mitigation
  • Consider installing a water detection and shut-off device. Ask us about Aquatrip
  • Know where your water shut-offs are    
  • Use braided hoses for your appliances and don’t leave them running when you are not home.
  • Ask us about our Risk Services team and our customized water mitigation plans.

• Install proper cigarette disposals on all balconies and common areas.
• Engage a Risk Consultant

HUB International has access to a one of North America’s most extensive Risk Management teams to assist Insureds in identifying potential hazards and effectively reducing the exposure to loss. This is the quickest way to stabilize insurance premiums and deductibles. We want to work with our clients to assist in mitigating and preventing losses wherever possible.

We know insurance is often the largest line item on a Strata or condominium
Corporation’s budget. We want to help you explain these increases to the owners.
Invite us to attend your next council meeting or AGM!