Commercial property rates have been rising, and some condo associations are getting hit with double digit rate hikes. If your condo association insurance is up for renewal soon, you need to be aware of what’s happening in the condo association insurance market now.
The Recent Surge in Commercial Property Insurance
MarketScout’s Market Barometer shows that commercial property insurance rates increased 9% in the third quarter of 2021. In some areas, rate hikes were even steeper, with increases of more than 20% in parts of California and Florida.
If that sounds bad, you might want to make sure you’re sitting when you find out how much rates increased for The Runaway Bay Condominium Homeowners Association in Florida. According to the Anna Maria Island Sun, their premiums increased 337%, going from $172,152 to $581,259.
Why Are Condo Association Insurance Rates Increasing?
Insurance rates have been rising in almost every line of commercial insurance, so the increases we’re seeing in the condo association insurance market are part of that overall trend.
At the same time, commercial property insurance rates are seeing steeper rate hikes than the general commercial insurance market, which increased 6.8% in the third quarter of 2021, according to MarketScout. The condo association insurance market is seeing significantly higher rates, as well. A combination of factors is to blame for this sharp increase.
The Impact of Natural Disasters on Condo Insurance
It’s not surprising that California and Florida are the two states experiencing 20% commercial insurance rate increases. California is struggling with wildfire losses, while Florida is dealing with hurricanes.
Natural disaster losses have been increasing, and this has had a direct and significant impact on the property insurance market.
The National Oceanic and Atmospheric Administration (NOAA) says that the U.S. experienced a record-breaking number of weather and climate events with losses in excess of $1 billion in 2020. There were 22 of these billion-dollar disasters, including one wildfire event, seven tropical cyclones, three tornado outbreaks, ten severe weather events, and one drought and heatwave event. The losses from all 22 natural disasters come to a total of around $95 billion.
2021 is shaping up to be another costly year. As of October 8, NOAA says there were 18 billion-dollar events. As a point of comparison, there were 14 billion-dollar disasters in 2019.
The U.S. Geological Survey says that rising global surface temperatures may contribute to an increase in droughts and more intense storms. Rising sea levels are also a concern for many coastal areas. NOAA says that the sea level has risen eight to nine inches since 1880, and high-tide flooding is 300% to 900% more frequent than it was 50 years ago.
The Call for More Building Inspections
On June 24, 2021, part of a 12-story condominium in Surfside, Florida, collapsed. According to AP News, an investigation into the cause of the collapse, which killed 98 people, has revealed evidence of extensive corrosion. An expert called the amount of corrosion “astronomical,” stating that it should have been obvious, and it should have been fixed.
The collapse has caused many people – including insurers, engineers, association board members and condo residents – to take a closer look at old buildings that might be overdue for repairs. In one example, The Wall Street Journal says that the condo association of a set of buildings located a few blocks away from the Surfside collapse hired an engineer to conduct an inspection. The engineer uncovered structural problems, and the residents voluntarily evacuated.
That inspection may have prevented another tragedy, but other buildings might not be getting inspected frequently enough. According to Tampa Bay Times, engineers in Florida are calling for an inspection of all large buildings within the first 30 years and then every 10 years after that. For buildings located within three miles of saltwater, an inspection is recommended within the first 20 years and then every seven years after that.
In the meantime, insurance underwriters are deploying stricter underwriting measures. They may demand more documentation to show that the association is keeping up with maintenance. Insurance companies may also raise rates or decline to renew a COA master policy.
Preparing for Your Next HOA Insurance Policy Renewal
The current condo association insurance market is not ideal, so associations need to be proactive about securing adequate property coverage and liability coverage.
Don’t let a notice of non-renewal or a massive premium hike catch you off guard. Start taking steps now to help make your next renewal go smoothly.
- Have the building inspected if needed. Inspections can help uncover problems so they can be fixed before they get worse, and inspections may be required under local laws.
- Set aside funds for repairs. If an inspection uncovers issues, or if problems are discovered any other way, the repairs need to be prioritized.
- Keep good maintenance logs. You want to make sure that you’re not forgetting important maintenance. You also need to be able to show that you’re keeping up with required maintenance. Good logs can help with both goals.
- Be ready for your premiums to go up. Even if you shop around for the best rates, you may find that premiums are more expensive going forward. You will need to factor this into your budget.
- Determine whether association fees need to increase. If you end up having to pay for expensive renovations plus premium increases, the numbers might not add up. To make up the difference, you may need to raise association fees for unit owners. Residents probably won’t be happy about this, but they might react better if they are given time to plan and understand why the increases are needed, so consider how and when to break the news.
- Secure coverage that precisely meets your needs. You don’t want to spend money on coverages you don’t actually need. You also don’t want coverage gaps. If you have an older building, look for insurance that includes Directors and Officers coverage and Ordinance and Law coverage.
Want An Easy Comparison Quote?
When you think about shopping for Condo Association Insurance, you probably expect it to be a time consuming process. In fact, that is exactly why some condo associations stay with the same insurance broker for so long ... even when they’re not completely happy.
But, what if shopping for coverage wasn’t time consuming at all? What if you get an online quote in minutes?
With Honeycomb, you can.
Make sure you’re spending your condo association’s insurance budget wisely.