1) CBC Story Link 2) Metro Story Link
This was a small new story that wasn't commonly picked up by most media sources. Co-operators, (one of the large insurers in Canada) has decided to drop coverage of condos. Back in March Aviva, another big insurer also backed away from insuring condos (link to Financial Post article) in Quebec.
However - if you know condos, and you know insurance, then you know this is very big deal. This is because it impacts the ability of Condo Boards to get condo insurance at all, let alone get reasonable rates for their buildings. Put simply, there's one less company out there willing to take on the risk of your condo - and there weren't that many to begin with. And with less competition, premiums paid by condos are likely to rise, and insurers may be even pickier.
Why have insurance companies started running from covering condos? Bottom line, the anticipated payouts for claims are exceeding the anticipated premiums to be collected by an unacceptable amount. They're losing too much on claims, or at least they think they will be. This violates a basic principle of the insurance industry: the premiums of the many - should pay for the claims of the few.
Is it, as the Financial Post article suggests, due to a wave of "shoddily built" condos? It's fair to say it's a contributing factors, though perhaps not quite as sensationalistic as the FP article might make it seem. Water penetration issues and the resultant mold issues have the potential to cause great and costly damage to condos, as detailed many times here on StrataSense. I can certainly agree that stricter building codes and inspection during construction by municipal authorities (and other regulatory bodies) would certainly help the issue of poorly built condos. Improvements to the Provincial Condo / Strata Acts to mandate better levels of funding for Reserve Funds, or establishment of them should be a good first start.
What can Condo Boards do about this? Not a lot other than make you have a good insurance broker working for you, that's always working to ensure you have the best coverage for the lowest rates. Good brokers will go that extra mile and explain unique things that you as a Board may be doing to reduce claims (if that is what you're doing). However one thing that all Boards should be doing is avoiding small claims against insurance, particularly for water damage. Several small claime may lead to you getting dumped by your insurer. I would even consider small special assessments if necessary to avoid water claims wherever possible. Save insurance for the truly big cases.
Boards should also consider setting aside funds to self insure against smaller claims, and increasing deductibles. Saves the Board money in the long run, but you'll have to resist the temptation to raid the "saved funds" for other uses....
~CondoSensei
This was a small new story that wasn't commonly picked up by most media sources. Co-operators, (one of the large insurers in Canada) has decided to drop coverage of condos. Back in March Aviva, another big insurer also backed away from insuring condos (link to Financial Post article) in Quebec.
However - if you know condos, and you know insurance, then you know this is very big deal. This is because it impacts the ability of Condo Boards to get condo insurance at all, let alone get reasonable rates for their buildings. Put simply, there's one less company out there willing to take on the risk of your condo - and there weren't that many to begin with. And with less competition, premiums paid by condos are likely to rise, and insurers may be even pickier.
Why have insurance companies started running from covering condos? Bottom line, the anticipated payouts for claims are exceeding the anticipated premiums to be collected by an unacceptable amount. They're losing too much on claims, or at least they think they will be. This violates a basic principle of the insurance industry: the premiums of the many - should pay for the claims of the few.
Is it, as the Financial Post article suggests, due to a wave of "shoddily built" condos? It's fair to say it's a contributing factors, though perhaps not quite as sensationalistic as the FP article might make it seem. Water penetration issues and the resultant mold issues have the potential to cause great and costly damage to condos, as detailed many times here on StrataSense. I can certainly agree that stricter building codes and inspection during construction by municipal authorities (and other regulatory bodies) would certainly help the issue of poorly built condos. Improvements to the Provincial Condo / Strata Acts to mandate better levels of funding for Reserve Funds, or establishment of them should be a good first start.
What can Condo Boards do about this? Not a lot other than make you have a good insurance broker working for you, that's always working to ensure you have the best coverage for the lowest rates. Good brokers will go that extra mile and explain unique things that you as a Board may be doing to reduce claims (if that is what you're doing). However one thing that all Boards should be doing is avoiding small claims against insurance, particularly for water damage. Several small claime may lead to you getting dumped by your insurer. I would even consider small special assessments if necessary to avoid water claims wherever possible. Save insurance for the truly big cases.
Boards should also consider setting aside funds to self insure against smaller claims, and increasing deductibles. Saves the Board money in the long run, but you'll have to resist the temptation to raid the "saved funds" for other uses....
~CondoSensei
