Briefing Note: Manitoba

Residential real estate and construction have been hit with rate increases ranging from 8% to 650% this year in Manitoba, says Colin Matchyuk, a commercial account executive at HUB International’s Winnipeg office.

That’s because apartment buildings built within 150 feet of each other are considered one building by many insurance providers in the province. “It impacts capacity,” he explains. “There may be eight buildings each worth $1 million within 150 feet of each other, and for underwriting purposes that’s treated as one $8-million building. So they can’t do it and you need to subscribe.”

And with subscription policies, to avoid adverse selection, “every insurer collects the same rate, and the worst rate of group prevails. It hurts the insured a lot…..Certainly the large realty groups who own these complexes are getting smoked, and that’s how you start hitting triple-digit percentage [increases].”

Commercial buildings haven’t been hit nearly as hard: They tend to be built out of steel or concrete, not frames. “The capacity is often triple or quadruple, and the rate is a fraction of [residential] because they also tend to have sprinkler systems and different roofing systems.”

Consequently, if a construction company is building a frame building, they’ll see capacity problems too. “Price is a secondary issue. The first battle for any construction project in the Prairies is finding capacity for a frame building.”

Subscription is also becoming the norm for large-scale construction projects, Matchyuk says. “Commercial buildings tend to be between $20 million and $50 million, and it’s just not possible to get a single insurer to put up that kind of capacity right now.” Whereas a subscription policy was rare 36 months ago, “now everything’s a subscription policy,” he observes.