The insurance market for residential real estate, particularly condominiums, is the most challenging class of business in the insurance industry. It is an unprofitable area of business for insurers as property losses continue to escalate.
Some insurers have stopped offering coverage to reduce their exposure. Others have increased premiums or deductibles.
One condo building had premiums increased by more than $250,000, from $69,000 to $322,000. Residents individually paid nearly $1,000 more per year in condo fees to cover the increase. In the prior year this building had a single significant claim of about $20,000.
Rates are not going up for any single reason. Losses from water damage, weather events and fire continue to increase along with replacement costs. In a high-rise community any fire and water claims are likely to impact on multiple units. Water damage caused by an overflowing bathtub, burst water line on a fridge or ice-maker, or failed washing machine hose is likely to impact on numerous units and be higher than what occurs in a single-family home. Insurers that continue to offer coverage to condominium buildings respond with rate corrections, increased premiums and higher deductibles.
In the insurance industry each company decides what risks they are willing to take on and properties they want to insure.
Condominium corporations are required to maintain insurance for their property. Condo owners can minimize their fees by taking steps to minimize the number and dollar amount of insurance claims.