B.C.’s condo insurance market has left homeowners with an average cost increase of around 40 per cent over the past year while deductibles have skyrocketed, the industry’s new regulator has found.
The B.C. Financial Services Authority, which regulates credit unions, insurance and trust companies, pensions and mortgage brokers, presented an interim report to the B.C. government on Tuesday looking into rising insurance rates.
“Overall, in our opinion, the state of the strata insurance market in B.C. is ‘unhealthy,'” CEO Blair Morrison writes in the interim report.
“That is, a market that fails to meet the goals of sustainability, affordability and availability. Our findings also show that all the participants involved in this market have a role to play to return it to a healthy state.”
The authority said price pressures will continue to go up. 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.
There are no details on how quickly the province will deal with the report’s concerns.
The document finds insurers are incurring losses mostly from minor claims, particularly those resulting from water damage, poor building maintenance practices and initial construction quality issues.
New building construction, building material changes, and rising replacement costs have put further strain on profitability.
Excessive exposure to earthquake risk in British Columbia has also prompted insurers to reduce the amount of strata insurance they offer, the report said.
“There is not enough capacity in the strata insurance market to support future expected demand,” Morrison concluded.
“Strata insurance can impact housing affordability for both homeowners and renters and the cost of individual homeowners’ condominium insurance. Lack of availability can place both at risk in the event of a loss.”
The final report is expected to be released this fall.
The regulator estimates there are nine or 10 companies providing strata insurance in B.C., and are mainly headquartered outside of Canada.
About 1.5 million residents live in strata properties in the province, and properties can range from under $1 million to more than $200 million in insured value.
“Another fundamental issue identified is the lack of capacity (or the supply of the insurance) to serve the market adequately. It is quite possible that capacity will contract further rather than increase,” Morrison wrote.