Condo insurance: Is market stabilization fleeting?

Canada’s condo insurance market appears to have stabilized but the industry shouldn’t get lulled into the feeling that reforms are no longer needed, said Aaron Sutherland, the vice president of Insurance Bureau of Canada’s (IBC) Pacific region.

Over the past few years, the condo/strata market saw skyrocketing insurance premiums, with British Columbia and Alberta particularly hard-hit. In 2020, condo insurance premiums in B.C. rose on average 40% from the prior year, with anecdotal reports of much larger increases.

Also in B.C. in 2020, IBC introduced a number of measures aimed at addressing affordability of strata insurance. This included amending depreciation report requirements for strata corporations (which would enhance building maintenance requirements) and standardizing the definition of a strata unit.

For example, there was no standard definition of where a unit owner’s property begins and common property ends. “Simple things like this can prolong claims because of the ambiguity,” Sutherland said.

Early in 2020, IBC also reported it would engage a risk manager to assist condo corporations that are having trouble acquiring insurance, particularly in Alberta.

“We’ve had far fewer concerns coming into our risk management service, which was admittedly quite busy a few years ago,” Sutherland said in an interview Wednesday when asked about the state of the market and IBC’s recommendations. “More recently, strata insurance concerns are few and far between, which is a good thing for consumers.”

The B.C. financial services regulator has undertaken a survey of the industry, the results of which are expected soon, Sutherland reported. “[That] will shed more insights on the current state of the market,” he said. “But our expectation is that we do expect that they will also find that the market has stabilized.”

Still, while the B.C. government has introduced legislation that would let them address many of IBC’s recommendations, “we haven’t seen the enabling regulations that would bring these improvements into force,” Sutherland said.

“Yes, the market is stabilizing. But I wouldn’t get lulled into a false sense of security here that we don’t need these reforms to come. And this is the message we’re really taking to government.”

Moving forward on reforms will preserve market stability over the long-term, particularly in the face of inflation, labour market challenges and the continuing effects of a changing climate that will likely continue to put pressure on B.C.’s condo stock, Sutherland said.

“There’s a lot of pressures that remain in this space and on the industry generally, and that could put further pressure on the condo line in the years ahead,” Sutherland said. “Really, the best thing we can do is continue to focus on how we improve the risk management of our strata stock out here in the west and right across this country.”

Key to this is improving maintenance and repair of stratas, something at the heart of the concerns that the industry saw a couple of years ago, “because we still have a fair way to go,” Sutherland said.

“While things may be stable today, we need to do all we can to preserve that stability for our customers and for strata corporations,” he added. “And the best way we can do that is by giving them the tools they need to improve their own risk profiles moving forward.”

 

Feature image by iStock.com/laughingmango