Real Estate

Condo Insurance Premiums Are Spiking In Canada, Threatening Resale Prices

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  • Jun 16th, 2020 7:51 pm
[OP]
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Feb 7, 2006
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Condo Insurance Premiums Are Spiking In Canada, Threatening Resale Prices

Anyone seen any impacts or effects outside of BC on condo insurance?

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Condo Insurance Premiums Are Spiking In Canada, Threatening Resale Prices
Climate change and rising construction costs are causing some insurers to leave the market.

TORONTO ― The cost of insuring a condo building is rising rapidly in Canada, and that could be bad news for owners’ resale values.

Faced with increased climate-related disasters and rising reconstruction costs, some insurers are backing out of the condo market, and that in turn is causing premiums for condo building insurance to spike.

Commercial insurance policies for condo buildings as a whole shouldn’t be confused with insurance policies for condo owners ― although those premiums are also on the rise.

British Columbia condo buildings are facing insurance premium hikes of between 50 per cent and 300 per cent, Condominium Homeowners Association executive director Tony Gioventu recently said.

On top of that, “deductibles are going from the conventional $10,000 or $25,000 to $100,000, $250,000 or $500,000,” Gioventu said in a Global News article.

One core reason is an increase in unexpected weather-related events that have caused insurance payouts to spike, explained Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada.

“There are more and more severe weather events that are resulting in more insured losses, things from wildfires to flooding,” he told HuffPost Canada.

He noted that B.C. has experienced large wildfires, while the 2016 fire in Fort McMurray, Alta., was a “record-breaking event.” The Ottawa region has seen two floods and two tornadoes in the past two years.

Insurance payouts for severe weather jumped to between $1 billion and $2 billion in recent years, from around the $400-million range just five years ago, Karageorgos added.

The result is that some insurers are discontinuing condo coverage, meaning the remaining insurers can charge higher premiums ― which they are using to cover not only weather events but also increased repair costs.

A shortage of skilled labourers across the country is pushing up the cost of reconstruction projects. Materials costs are also rising, further raising the payouts insurers are on the hook for.

In one extreme example, a condo complex in Ottawa recently found its insurance premiums rising by 730 per cent because of wind and fire damage.

“Some people are suicidal,” condo board president Marie Weerasooriya-Epps told CBC News. “Some people are headed for nervous breakdowns.”

‘A downward spiral’
While not every case is as extreme, rising insurance costs can take a bite out of property values. In general, the rule is that condo values are the inverse of monthly fees ― the higher the fee, the lower the resale value.

And the worst-case scenario could indeed be bad. In a recent book, author Randy Lippert warned that condo corporations in Toronto and New York City are at risk of going bankrupt over rapidly rising costs. Lippert noted that condo fees have been rising faster than homebuyers’ incomes for years.

Because condo developers often promise unrealistically low condo fees when they launch projects, buyers often find themselves facing higher costs than they’d expected, and will sometimes allow buildings to fall into disrepair. That in turn increases costs in the long run, becoming a downward spiral for those buildings.

“I think there will be a number of condos where those fees will become unsustainable and people will want to get out, and there’s a point at which it (all) becomes unsustainable,” Lippert told HuffPost Canada earlier this year.

However, not all condo buildings are in poor financial shape, and buyers can still find reliable buildings to buy condos in, Lippert added.

https://www.huffingtonpost.ca/entry/con ... 3e6f8a235c
65 replies
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Weather is one thing, but I'm willing to bet the fact that every condo in the country is an Airbnb hotel that sees thousands of overnight customers a year is a bigger factor. Those people cause damage, increase wear, hurt people, get hurt themselves, and are generally just giant costs that the unit owners offload onto the common property. All of that factors into the frequency and size of claims.
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Feb 19, 2019
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Piro21 wrote: Weather is one thing, but I'm willing to bet the fact that every condo in the country is an Airbnb hotel that sees thousands of overnight customers a year is a bigger factor. Those people cause damage, increase wear, hurt people, get hurt themselves, and are generally just giant costs that the unit owners offload onto the common property. All of that factors into the frequency and size of claims.
Majority of condos don't allow Airbnb, not sure what percentage allows in ON but it's a minority.
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senasena wrote: Majority of condos don't allow Airbnb, not sure what percentage allows in ON but it's a minority.
Most people still do it whether their building allows it or not.
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Piro21 wrote: Those people cause damage, increase wear, hurt people, get hurt themselves, and are generally just giant costs that the unit owners offload onto the common property.
This is always mentioned but where is the actual data or evidence to back up these kinds of claims? Renters are really much more likely to increase wear and cause damage in a building...
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Nov 15, 2019
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Interesting article. I wonder if the rising insurance costs are rising nation-wide or limited to certain areas facing greater environmental risks.
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Feb 29, 2008
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Piro21 wrote: Most people still do it whether their building allows it or not.
You have no idea what you’re talking about.
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Nov 15, 2019
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Condo Smarts: How to manage the dramatic increase in insurance rates
Tony Gioventu / Times Colonist
DECEMBER 4, 2019 06:00 AM

Over the past few months across B.C., there has been an industry struggle to renew strata-corporation insurance policies. With renewals, the cost of the insurance has increased anywhere from 50 to 300 per cent.

Deductibles have also increased substantially, from a manageable $25,000 per claim to as much as $250,000 and $500,000.

While not all regions of the province have been affected the same way, some building types or large strata communities across B.C. have seen dramatic increases.

B.C. currently has more than 30,000 strata corporations. They vary in size from a duplex to more than 1,000 units in a single strata community.

Many conventional strata corporations are low-rise wood-frame apartment buildings, townhouses or high-rise buildings. When a water failure or fire occurs in multi-unit buildings, multiple units are often affected.

The result is an increased risk of cost for damages and losses by the insurance industry.

Under the Strata Property Act, a strata corporation must insure for full replacement value of all common property, common assets and fixtures.

This basically means the original construction in a duplex, town-house, low-rise or high-rise community, including finishing attached to the building, is covered under the strata corporation insurance policy.

What’s causing the dramatic increases?

In addition to world-wide catastrophes, we live in a high-risk earthquake zone, and with several major building claims in the province, there are a reduced number of insurance companies who are covering strata insurance in B.C.

The hardest-hit regions are the high-density metro areas, but resort properties and communities with large developments of more than 250 units are also feeling the crunch, as they have the highest compound risks when there is a claim.

In addition, with a limited number of insurers, increase in claims, higher property and construction values and a high demand for insurance, a supply/demand imbalance has been created where the insurers have imposed much higher costs and deductibles to manage risks.

How does this affect owners in B.C.?

If your strata is faced with a substantial increase in insurance rates, the cost will be reflected in your annual budget, which determines your annual strata fees.

If the deductible is dramatically increased to $100,000, for example, it means any claims under $100,000 are not covered by insurance, and, subject to your bylaws, each owner is likely responsible for damages to their strata lot and the corporation is responsible for the cost to repair common property.

The result is that many of the past insurance costs will now be downloaded onto the affected owners in the event of a claim. If an owner is responsible for a claim — for example their washing-machine hose fails, flooding out the building — the owner could be responsible for the $100,000 deductible.

Homeowners need to consider condo-owner insurance to cover their liability in the event of a claim for damages to their unit, the cost of a deductible or the risk of being sued by other owners if they cause a claim.

If there is a claim from a failed pipe and the amount of the claim is more than $100,000, resulting in an insurance claim, the $100,000 deductible becomes a common expense of the strata and the council can pay it from the contingency fund or directly levy owners without the need for a three-quarter vote at a general meeting.

How can our strata limit the risk?

Work closely with your broker. If the strata corporation is faced with a change in insurance or the possibility of no coverage, immediately give notice to owners. If you fail to obtain insurance, contact your lawyer to determine the liabilities for owners and council members and what next steps you should consider.

Maintain your buildings. Work with your owners to manage risks. Verify that all units with washing machines have upgraded their hoses to braided steel. Failed rubber hoses in cramped closets and spaces are a chronic cause of water damages.

Address risks that can result in a claim. Owner activities such as smoking as well as barbecues on balconies, balcony gas heaters and in-suite hot-water tanks all present a higher risk.

Repair access or building issues that could raise risks an injury. Update your bylaws: Bylaws that could result in human-rights complaints or court actions also increase your risk.

What should buyers consider?

Before you purchase, obtain a copy of the strata insurance and confirm the insurance cost, deductibles for water escape and the renewal dates. Over the coming year, the increases will likely continue.

Tony Gioventu is executive director of the Condominium Home Owners Association.
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Oct 30, 2019
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I bet you condo prices keep skyrocketing.

We have heard over and over how X and Y will make condo prices go down. Nothing happened. We have a housing crisis due to a shortage of supply.

This is just more noise.
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moeymoeymoeymoe wrote: Explain
Jay's entire schtick is to vigorously spread FUD to derail any potential examination of the rampant crime going on in the housing industry because he's profiting from it. Anyone can look at the Airbnb listings in Toronto and see for themselves, but he's gotta gaslight and push his alternative facts to the last.
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Piro21 wrote: Jay's entire schtick is to vigorously spread FUD to derail any potential examination of the rampant crime going on in the housing industry because he's profiting from it. Anyone can look at the Airbnb listings in Toronto and see for themselves, but he's gotta gaslight and push his alternative facts to the last.
Still waiting on your PROOF that most condo units are on Air BNB. I would love to see the data that you found on that. You are like many of the bears who have com and gone here. So caught up in your feels you twist yourself into a pretzel making such ridiculous and outlandish statements.

LOL @ "anyone can see for themselves" Where is the proof that the majroity of the condo units are on Air BNB.
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Dec 13, 2014
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Our corp is currently in a lawsuit with the previous developer for faulty workmanship causing massive damages.
Tarion warranty is a joke as are the inspections.

Something really does need to improve so people aren't footing the bill for poor builds.
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Nov 15, 2019
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mlong813 wrote: Our corp is currently in a lawsuit with the previous developer for faulty workmanship causing massive damages.
Tarion warranty is a joke as are the inspections.

Something really does need to improve so people aren't footing the bill for poor builds.
Can you tell us more information about the situation?
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mlong813 wrote: Our corp is currently in a lawsuit with the previous developer for faulty workmanship causing massive damages.
Tarion warranty is a joke as are the inspections.

Something really does need to improve so people aren't footing the bill for poor builds.
Something Ford can really do to gain some approval rating back. At some point he needs to tell his builder buddies that it's better to accept some regulation now, than to have a ton more regulation imposed on them, with a giant serving of taxes, when Ford gets kicked out of office.

OP's questions: Condo insurance in Ottawa has been shooting up for the past 3 years, mostly due to insurers dropping out of the condo insurance market.
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Oct 7, 2007
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What is the real story here in these stories about insurance costs skyrocketing for condo owners?

The first article posted cites these as the reasons:
Faced with increased climate-related disasters and rising reconstruction costs, some insurers are backing out of the condo market, and that in turn is causing premiums for condo building insurance to spike.
but have these changed significantly in recent times?

The same article mentions this:
He noted that B.C. has experienced large wildfires, while the 2016 fire in Fort McMurray, Alta., was a “record-breaking event.” The Ottawa region has seen two floods and two tornadoes in the past two years.
I know a lot of detached homes were affected by the wildfires but was the number of condos affected by these events significant? Maybe it was or maybe it is only part of the explanation for the increase.

I BELIEVE that the insurance costs will go up if the article says so BUT what I am struggling to understand is whether the mentioned reasons are the true explanation for the increase or if there is something more to it that isn't being mentioned.
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What do you think the cost per unit is?

Even if you assumed a $400k premium increase on say 300 units, that works out to $111/month in increased maintenance fees for the premiums. If the premiums were to stay flat from there on out, home owners should be able to absorb it. It's not going to crash the market.
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Dec 4, 2004
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JayLove06 wrote: Still waiting on your PROOF that most condo units are on Air BNB. I would love to see the data that you found on that. You are like many of the bears who have com and gone here. So caught up in your feels you twist yourself into a pretzel making such ridiculous and outlandish statements.

LOL @ "anyone can see for themselves" Where is the proof that the majroity of the condo units are on Air BNB.
This is by no means proof of "the majority of condo units", but my condo complex specifically bans short term rentals of less than 6 months, but I see at least 5 units listed on AirBNB. One blatantly shows a photo of the building itself. The others I can tell from the layouts in the photos. I have personally encountered people dragging suitcases in the parking garage totally lost trying to find the elevator lobby.
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poorwingman wrote: What do you think the cost per unit is?

Even if you assumed a $400k premium increase on say 300 units, that works out to $111/month in increased maintenance fees for the premiums. If the premiums were to stay flat from there on out, home owners should be able to absorb it. It's not going to crash the market.
In fact such increases hurt the affordable markets a lot more. If market rent for each unit is 2k/month, that increase work out to be 5% of market rent. If market rent is only 1k/month, that suddenly becomes 10% of market rent, which could have a much bigger impact on the value of the unit.
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I don’t think @Piro21 was saying most condo units are occupying AirBnB listings, the comment was that most of the AirBnB hosts list their units whether or not the building allows it. I honestly have no idea if that statement itself is true, although I’m sure people circumvent rules all the time. As a percentage, AirBnB hosted condos obviously represent a small portion of the total.

However, I doubt AirBnB activity really has anything to do with increasing commercial condo insurance premiums, based on what I read.

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