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BC Strata Insurance Rates Up 40% on Average, More Than Doubling in 6% of Buildings


Under Real Estate

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June 19th, 2020

Strata corporation insurance rates have jumped about 40% across BC since last year, with deductibles sometimes leaping to triple-digit increases, the B.C. Financial Services Authority said June 16.

“The current state of the strata insurance market is unhealthy,” said authority vice-president and deputy superintendent for regulation Frank Chong.

Among key report findings, based on a survey of 6,000 strata and townhouse properties, are :

• an average increase of 40% year-over-year to strata insurance premiums province-wide;
• a 50% increase in Metro Vancouver;
• 54% of strata properties experienced a premium increase of less than 30% compared to premiums the previous year;
• 31% of strata properties saw increases in the 30-50 % range;
• 9% faced year-over-year increases of 50 -100%; and
• 6% saw increases in excess of 100% compared to the previous year.

“Price pressures will continue,” the authority said in the report to Minister of Finance Carole James. “Buildings considered to be higher risk are expected to face the most significant increases as well as the possibility of not being able to obtain full, or in rare cases any, insurance coverage.”

The data is in an interim report done at the direction of the provincial government. Further findings will be released in the fall after continued stakeholder consultations, Chong said.

The authority regulates the province’s insurance industry, among other things.

CEO Blair Morrison said the market is failing to meet goals of sustainability, affordability and availability

“Despite large increases already being felt, the situation has not yet stabilized, meaning many stratas, particularly those in buildings considered to be higher risk by insurers, can expect to face further pricing pressures as well as the risk of not being able to obtain full strata property insurance coverage,” Morrison said.

The industry generates about $300 million in premiums, covering more than $100 billion of insured property value. Coverage is mandatory under BC’s Strata Property Act, the authority told James.

Insurance under the act, which must provide full replacement value of the common strata property and assets, does not cover individual unit insurance, which owners need to ensure under individual policies.

The authority said earthquake coverage is not required under the act, but it is often included in strata property coverage.

“Strata corporations that choose not to purchase earthquake coverage are still covered for fire damage following an earthquake,” the authority told James. “An estimated 1.5 million residents live in strata properties in BC and properties can range from under $1 million to over $200 million in insured value.”

The investigation found evidence showing the industry has been incurring losses over the past three years from mostly minor claims, particularly from water damage, due to poor building maintenance

“The data suggests that strata insurance has also been used to fill in the gaps left by other forms of protection such as home warranties for new buildings and maintenance programs for older buildings,” the authority said.

Further complicating things is the exposure to risk insurers have to earthquake damages in B.C. which has prompted many to reduce the amount of insurance they offer, the study found.

“With this reduction in capacity comes upward price pressures,” the authority said.

Study : BC Strata Insurance Market “Unhealthy” by Jeremy Hainsworth | BIV

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