Strata Insurance Increases in BC: What to Expect as Home Buyers

Expert Minute: Our thoughts on the recent strata insurance rate increases in BC

There have been a few articles circulating recently which are setting off alarm bells around strata insurance. We think it’s important to shed a little more light on the subject as we’re hearing from a lot of clients and potential homebuyers who are feeling concerned. 

Strata insurance rates are rising

Over the past few months across BC, a lot of strata buildings that are renewing their insurance policies are seeing significant increases in premiums and deductibles for the coming year, with rates rising between 50 to 300% in some cases. 

For home buyers, the important questions are how much, how soon and is there a way to gauge if a property’s insurance might increase or not before purchasing in the building?

Why are strata insurance premiums increasing?

We have been fortunate in BC to have excellent coverage at relatively low rates and that is likely going to eventually change with a ripple effect in the marketplace. A lot of buildings with consistent issues and lack of proactive repairs and maintenance are among the ones to see significant increases on their premiums and deductibles. Howeverwe are also seeing situations where buildings with no claims history and no likelihood of any major risk in the near future are receiving notice of rate increases as well. 

Amongst the reasons for the increases have been shortages of labour within the construction industry, increase in construction and materials costs as well as higher payouts and replacement costs for developments.

What has happened within the insurance industry to create the urgency to change so quickly? 

As it turns out, the insurance industry has their own insurance, called “reinsurance,”and they are feeling the same effects of increased disasters around the world increasing their payouts. It will be interesting to monitor how competitive insurance companies get and who steps up in vying for more market share as building owners look to explore other insurers. We suspect the availability of competitive rates and higher insurance premiums for insurance coverage will be the case over the next couple years, but it is hard to say if that will be the catalyst for downward movement in real estate values. 

How does that impact your decision to purchase a strata-titled property?

A good rule of thumb when purchasing a strata-titled property is to see when the insurance policy was last renewed. These increases started around fall of 2019 so if the building is renewing this spring or summer 2020, you could see a large jump from the current rates. Another item to note is the state of the building: have they been deferring a lot of work or have they been seeing a lot of leaking pipes or water ingress? These are indicators that a jump in fees could be coming. But, important to note, is that they can jump, even without those indicators.

Further resources:

Learn more about the strata insurance rate increases and why they are happening from the Insurance Brokers Association of BC (IBABC).