COVID-19 and insurance woes create ‘perfect tsunami’ for condo managers

COVID-19 and insurance woes create ‘perfect tsunami’ for condo managers

The excerpted article was written by Yvette Brend · CBC News ·

The coronavirus crisis is complicating condo life, just as a second wave of soaring insurance premium hikes is about to kick in.

For condominium residents, the COVID-19 crisis has led to elevator restrictions, party bans and quiet hallways as people try to keep two metres apart.

For condo property managers — it’s a frantic time.

“Some stratas are more prone to drama that others,” said property manager Allen Regan who is busy keeping up with changing disinfecting and physical distancing rules, while juggling the personalities and logistics involved in upcoming annual general meetings.

The cost of catastrophes, claims and expensive repairs have sent insurance costs soaring — in some cases doubling them — and many were hit with new costs at the end of 2019.

The other half were bracing for cost increases starting April 30.

Then came COVID-19.

“It is sort of a perfect tsunami of problems all coming at once,” said Regan, managing broker with Bayside Properties and Services Ltd., which helps manage strata corporations in the Lower Mainland.

Now the coronavirus crisis is forcing some of B.C.’s condominium stratas onto shaky legal ground as they try to balance achieving a quorum of 10 council members to pass budgets with physical distancing rules.

Building managers are also trying to balance the privacy rights of potentially-infected residents in isolation with the safety concerns of other condo dwellers as the virus spreads worldwide.

Some of them are vulnerable because of their age or underlying health issues. People are being urged to inform management if they are self-isolating, so it can take safety and cleaning precautions.

“You need to look out for them and accommodate them at the same time,” said Tony Gioventu, president of the Condominium Home Owners Association of B.C.

Condo community enforces social distancing

Gioventu says the condo community is also good at catching rule breakers, like the group that returned from Arizona to Vancouver Island last week and headed out shopping in the community but were reported to health authorities by neighbours.

Gioventu also urges condo dwellers to call police if they hear house parties — as gatherings like this are against provincial health rules and punishable with fines.

As cleaning regimes are ramped up, strata corporations also must pass budget increases to handle rising insurance costs. Regan says this must happen fast as strata corporations are non-profits, so they do not have financial cushions to draw on if owners refuse to approve budget increases or pay strata fees or special levies.

If that happens, then “it’s a huge, immediate financial problem for the strata corporation. This at a time when people are strapped financially,” said Regan.

‘Rabble rousers’ may challenge video AGMs

He is not sure if anybody will challenge the video conferenced AGMs as invalid under the Strata Property Act.

To hold an AGM, there needs to be 10 people present, and that’s a challenge with social distancing rules that require humans to stay two-metres apart. Regan said that stratas can pass a bylaw to allow an alternative form of meeting but not many stratas have that in place.

So they are moving ahead anyway, as budgets need approval and corridors need cleaning.

“We have a few rabble rousers that have threatened to go to the CRT — which is the civil resolution tribunal — if meetings aren’t held ‘properly.’ I think most councils are saying fine. Let the chips fall where they may,” said Regan.

Source: CBC News

Tough insurance market conditions driving premiums through the roof

The cost of catastrophes, construction, claims and reinsurance has pushed insurance premiums on many British Columbia condominiums through the roof.

While petitions and critics call for government intervention, industry experts say it’s a complex market issue with no easy fix. And for some, it’s about to get worse.

“We saw half of the stratas get hit on December 31, and the other half are going to get hit on April 30,” said Mike Alavi, senior property manager with Korecki Real Estate Services Inc.

The company manages 7,500 strata units across dozens of buildings in the Lower Mainland. Of the strata corporations that have recently renewed their insurance, Alavi said, around 90% saw premium increases of between 50% and 100%.

“I think what we’ve seen is a correction in the market,” Gioventu said. “It’s not like it’s exponentially incorrect, but it’s just that it’s happened all at once.”

CHOA reviewed B.C. insurance premiums dating back to the 1980s and 1990s and found that they are not far off from where they were before industry players began adjusting their rates this past year. Gioventu called it a “bit of a revelation.”

He said on a low-risk building with a good insurance history, an insurance company charges between $0.13 and $0.15 per $100 of insured property. High-risk buildings – ones that are old and poorly maintained – might cost $0.22 per $100 of property.

At that rate, insuring a high-risk property with a replacement value exceeding half a billion dollars – which exists in B.C. – might cost $1.1 million annually. In the event of a total loss, an insurer would be paying out roughly 455 times what it collected in premiums in a given year, meaning – all else equal – the insurer would have had to collect 455 years of insurance premiums to break even on the claim.

Gioventu believes market competition is partly responsible for keeping insurance premiums relatively stagnant over the past several years, despite the fact that buildings have kept aging while property values have increased and risk has grown.

The number of residential strata claims and what they cost has also risen. According to insurance broker BFL Canada, one in three stratas will submit a claim this year. Average losses now cost more than $50,000, and 54% of losses claimed are worth more than $100,000.

READ FULL ARTICLE HERE AT BUSINESS IN VANCOUVER

Warning of collapse in B.C. condo market

The excerpted article was written by Ross McLaughlin, CTV News Vancouver

VANCOUVER — There are dire warnings that the condo real estate market in B.C. could collapse unless the province steps in to stop it.

It all has to do with skyrocketing insurance rates. And some condo buildings are unable to get insurance at all, putting owners at risk of losing their financing and being unable to sell their properties.

Zafar Khan had an offer on a Cloverdale condo he was selling, and the deal was to close Feb. 3. But at the last minute it all fell apart, as the buyer pulled out of the sale.

“I found out the strata ran out of insurance,” said Khan.

He said he had no idea, and only learned about it later from the buyer’s real estate agent, Sevin Atilla.

“We found out the strata’s insurance came up for renewal and they were not able to renew it,” said Atilla, who works at Oakwynn Realty.

“I don’t blame the buyer at all,” Khan said.

Banks won’t finance uninsured buildings and that’s what happened with the loan the buyer had secured.

“As soon as they found out there was no insurance in place, they retracted the mortgage approval,” explained Atilla.

CTV News reached out to the property manager, Crossroads Management Ltd. The company said it tried five different insurance brokers, all of which were unable to find an insurance company to insure the complex.

Crossroads said it’s still looking.

Owners are now at risk if disaster strikes; their banks could pull their financing and they will be unable to sell their properties.

“This affected our deal and we will see more of these deals collapsing in the future,” said Atilla.

“This is something no one had foreseen,” said Tony Gioventu, executive director of the Condominium and Homeowners Association of B.C.

Gioventu knew skyrocketing insurance rates and high deductibles were coming as insurance companies pulled out of B.C.’s high real estate market and struggled to keep up with claims from global disasters, but buildings unable to get insurance at all is something that no one expected.

“This will collapse our real estate industry because no one will be able to get mortgages and there will be no buyers and no sellers,” Gioventu said.

Gioventu knows of a handful of buildlings currently unable to get insurance, and said there could be more out there.

And massive insurance premiums are adding to the pressure.

The strata president of one Burnaby condo told CTV News their annual insurance premium has quadrupled, from $200,000 a year to $810,000, and they can no longer afford to pay it.

High premiums coupled with extremely high deductibles are also resulting in massive increases in maintenance fees or special assessments.

“This is not a small number of buildings now. We’re now looking at several hundred buildings throughout the Lower Mainland that are seeing such dramatic increases,” said Gioventu.

Doug Whicker, a strata president of a New Westminster condo complex facing a 40 per cent insurance premium increase, has sent a letter to Premier John Horgan asking for intervention. He says it’s reached a crisis and suggests that B.C. set up a non-profit strata insurance corporation similar to ICBC.

“Immediately. We can’t wait,” said Whicker.

“Government intervention is necessary and it’s imperative,” added Khan.

CTV News reached out to B.C. Finance Minister Carole James, who has acknowledged the problem.

“We think there are good opportunities to be able to talk with the industry, to talk with condos, to talk with insurance companies, and look at how we can address this issue,” she said.

Robert de Pruis with the Insurance Bureau of Canada’s western office told CTV News the IBC has been in contact with insurance brokers, underwriters and condo groups and is planning to hold regional meetings across the country to address the condo insurance issues — including one in B.C. in March — to try to find creative solutions to address the problem.

If you’re a condo owner reading this and are worried about how to protect your investment, there’s little you can do except to try to find insurance to cover high deductibles. But without a master condominium insurance policy, you’re out of luck.

The buildings that are being hardest hit are those that are the most expensive: buildings with a high number of recent claims and strata corporations that have failed to keep up with maintenance and repairs.

The Insurance Bureau of Canada says it’s a complex issue that won’t be solved quickly.

However, for Khan and others in his situation without insurance it’s an emergency.

“If my lender finds out they’ll pull the mortgage,” he said.

Condo Insurance: Three Steps To Mitigate Risk From Rising Premiums & Deductibles

It is safe to say that condo insurance is becoming a sore spot for condo corporations not only in Ontario but across Canada. Condo corporations have seen soaring premiums and deductibles. In some jurisdictions, it has been reported that premiums have risen 780%.

The reason for the increase seems to be multi-faceted including, but not limited to, higher property values, reduced number of insurers, rising costs for insurers and drastic weather patterns.

The issue is so pressing that the Insurance Bureau of Canada is engaging a risk manager to make recommendations to condo corporations to reduce risks. The problem, however, is that the Insurance Board of Canada has no cap on condo premiums and the government does not require insurers to apply for rate increases.

So, what can a condo corporation do to mitigate this risk?

1. Standard Unit By-law

One of the key features of a Standard Unit By-law is defining the components of the units that the condo corporation is responsible to insure and defining the components that the owners are responsible to insure. Condo corporations should be passing Standard Unit By-laws and removing items such as flooring and countertops from the items that are the Corporation’s responsibility.

For condo corporations that have Standard Unit By-laws or Standard Unit Schedules (which are prepared by Declarants), boards should be reviewing these documents to determine if other items should be removed.

The purpose of removing items from the condo corporations’ insurance responsibility is not to merely pass the buck to unit owners. Rather, it mitigates the collective risk of unit owners and common expense increases.

Unit owners sometimes forget that the condo corporations’ insurance premiums and deductibles (when paid) form part of their common expenses. They also sometimes forget that if an insurance claim is made by the condo corporation pertaining to damage to a unit, the condo corporation will be required to pay the deductible. In this scenario, one unit owner may have his/her flooring replaced (the cost of which could be $15,000) but all unit owners will be required to contribute towards the cost of the deductible.

2. Insurance Deductible By-law

Speaking of deductibles, condo corporations may pass by-laws which extend the circumstances in which unit owners may be responsible for the lesser of the cost of repair and deductible.

Under the existing Condominium Act, 1998 (the “Act“) the deductible may only be charged back to the unit owner if the damage was caused by the unit owner’s act or omission and only for damage to that owner’s unit. The Act, however, allows by-laws to be created which makes unit owners responsible for these costs in the event the damage is from their unit irrespective of any act or omission and for damage to other units and the common elements.

There are two key considerations to keep in mind. First, the charge back must pertain to insurable events such as floods or fires. Second, the charge back is limited to the lesser of the cost of repair and deductible. For example, if the cost of repair is $50,000 and the deductible is $10,000, the condo corporation is only authorized to charge back up to the deductible irrespective of whether a claim is made by the condo corporation.

Amendments to the Act will be coming into effect which will make unit owners responsible for the lesser of the cost of repair and deductible for damage to other units and the common elements in the event the damage resulted from an act or omission of the unit owner and the damage did not result from an act or omission of the Corporation or any of its staff. To be clear, the Corporation (once these provisions come into force) will no longer need to pass a by-law to extend the circumstances to address damage to other units and common elements.

The one catch to the amendments of the Act is that the ability to pass no fault charge back by-laws appears to have been removed. As noted above, this scenario deals with insurable events where the source of the damage is the unit but the owner’s acts/omissions were not the cause. However, it appears that condo corporations will be permitted to amend their declarations to address these no fault scenarios. The threshold to amend the declaration for this purpose is quite high and requires 80% consent of the unit owners.

We should note that it is questionable how existing Insurance Deductible By-laws with no fault provisions will be treated once the amendments to the Act come into force, but it is our opinion that there is still value in passing these by-laws.

3. Water Escape Detection Devices

Devices are available which detect water escape and immediately shut down the water line. These devices should mitigate damages and provide comfort to insurers when ascertaining risk and in turn, calculating premiums and deductibles.

Prior to installing water escape detection devices in the units, boards are encouraged to review the legalities of such installations in the unit with management or counsel.

The above list is in no way exhaustive, but if these steps are taken, condo corporations should be able to mitigate their risk pertaining to rising premiums and deductibles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

Lougheed Estates has been without insurance since Dec. 31, 2019

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IBC to hire risk manager to assist condominium corporations

EDMONTON, Jan. 7, 2020 /CNW/ – To address issues that have arisen in the commercial insurance market, and especially in condominium insurance in Alberta, Insurance Bureau of Canada (IBC) will be engaging an expert in risk management to assist those having trouble accessing affordable insurance.

IBC will make the risk manager available to assist condo corporations that are having trouble acquiring insurance. The risk manager will make practical recommendations that will reduce condo corporations’ risk and help improve the availability of insurance. For example, if a condo corporation can’t obtain insurance because of numerous water damage claims, the risk manager will identify that as the obstacle for the condo corporation and advise them on the maintenance required to reduce that risk.

While the commercial insurance market has been hardening globally, there are a number of condominium corporations in Alberta that are feeling the pressures more significantly than others. The IBC risk manager, to be hired early this year, will work closely with the insurance industry, the provincial government and condominium corporations to understand risks facing condos and how they can prioritize actions needed to access much-needed insurance.

“We recognize the seriousness of the issues facing a number of condominium corporations in Alberta, especially in Fort McMurray, and want to help all stakeholders find solutions,” said Celyeste Power, Vice-President, Western, IBC. “Insurance is all about understanding and pricing for risk. Engaging with a risk manager will help those who are having difficulty finding insurance to take steps that will help them get the insurance coverage they need.”

There are about 9,000 condominium corporations across Alberta, and recent media reports suggest at least a handful are having trouble accessing insurance or are seeing increased rates. Being better informed will help condominium boards to examine and respond to these concerns. The risk manager hired by IBC will be able to increase boards’ awareness about how insurers view risks and evaluate properties. The risk manager can also provide advice on how claims history, building materials and location can affect insurance rates.

“We understand this is an incredibly stressful situation for Albertans in the affected condos. We do not want to see any Albertan lose their home or have difficulty paying their bills. We are hopeful that this first step will help inform those affected and improve the situation,” Power added.

This is just one step of many that the insurance industry is taking to address this issue. IBC has brought together industry representatives and key stakeholders to take action and is also working closely with the provincial government.

“It is essential that all stakeholders work together to find common-sense solutions to relieve the pressure in the condominium market right now,” Power concluded.

About Insurance Bureau of Canada

Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market in Canada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 128,000 Canadians, pays $9.4 billion in taxes and has a total premium base of $59.6 billion.

For media releases and more information, visit IBC’s Media Centre at www.ibc.ca. Follow us on Twitter @IBC_West or like us on Facebook. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

Backgrounder

How insurance for condominium corporations works

Tough market conditions have led to companies re-evaluating their risk appetite for writing new business and having more discipline in commercial underwriting. Many insurers across Canada, and in Alberta in particular, have seen more frequent and more severe weather losses, including losses as a result of the 2013 floods in Calgary, the 2016 wildfires in Fort McMurray and the 2019 fires in High Level.

  • 7 of Canada’s 11 most-costly insured disaster events have taken place in Alberta, and this has contributed to changes in the way companies underwrite risk and price premiums.
  • Several lines of insurance business are currently experiencing high losses. A hardening insurance market – a period where claims payouts have increased – makes insurers less inclined to write new business, making it more difficult for commercial consumers to obtain insurance.

Insurers look at a number of factors to assess risk and price premiums, including the following:

  • Type of construction and the materials used in the building’s construction, including whether materials are fire resistant, e.g., wood frame structures are considered higher risk.
  • Location of the condo, e.g., buildings located on flood plains pose a greater risk of water damage due to overland flooding, and in the northern parts of Alberta, water damage from burst pipes is more prevalent.
  • Multi-unit condos are prone to water damage through accidental overflowing of toilets and bathtubs, as well as burst pipes and supply line failures.
  • Claims history, such as repeated water damage claims or multiple other claims, will affect the availability and affordability of insurance coverage.

There are unique risks to consider when insuring condo corporations, including the following:

  • Difficult economic conditions have led to higher vacancy rates, which pose significant risks.
  • A unit occupied by tenants, as opposed to the unit owner, may not be maintained as adequately and repairs may not happen as quickly.
  • Higher tenancy rates can often lead to less oversight from the board of directors, which could lead to irregular maintenance or substandard repairs in the condo building.

What you can do now:

  • Talk to your insurance representative about what risk management strategies will help protect your condo. An efficient and effective maintenance program will help to mitigate many of the risks your condo corporation faces.

If you are a condo unit owner:

  • Ask your condo corporation about its maintenance strategy and what it is doing to mitigate risks.
  • Ask your condo corporation about the condo’s claims history and whether there are maintenance issues that need to be addressed.
  • If you have questions about insurance, call IBC’s Consumer Information Centre at 1‑844‑2ask‑IBC for more information.

SOURCE Insurance Bureau of Canada

www.ibc.ca

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