The B.C. legislature has been seized three times so far this month with the condo insurance crisis and there are two clear takeaways.
The first is that the problem of abrupt, stratospheric hikes in strata condo insurance is enormous. MLAs are getting a wave of complaints from constituents staggered by outrageous price hikes.
The second is that no one is clear yet on what to do about it. Finance Minister Carole James has been treading water in the house while the government takes stock of the developing emergency.
For a government that is devoted to “affordability,” emergency doesn’t begin to describe it. Just as the NDP was congratulating itself for saving families up to $1,800 a year by eliminating Medical Services Plan premiums, that entire saving for many condo dwellers was wiped out and then some by runaway insurance premium hikes.
There’s a potential flip side effect as far as affordability is concerned, but it has grim implications. The shocking rate hikes could stop a significant part of the real estate market in its tracks.
The government likes to cite moderating prices as a plus. But a possible sharp drop in condo prices because they’re too expensive to insure — or conceivably because they simply aren’t insured, so no lending is available — hardly counts as a plus.
Here’s a selection of recent horror stories.
A couple put down $10,000 for an older condo but the building just posted a notice saying it can’t buy insurance. So the bank won’t provide a mortgage.
A new Fraser Valley highrise saw its insurance premium increase to $588,000 from $66,000. It would have needed a $6,000 levy on each resident to pay. The insurer offered to halve the rate to a quarter-million dollars, but with reduced coverage.
Water deductibles, the repair cost to owners and residents for water damage before insurance coverage kicks in, have gone up ten-fold for some buildings, to $100,000 or more.
A Kamloops building saw a 335% rate hike and the water deductible went to $250,000 from $5,000. That translates to a $1,000 levy and a $100 a month increase in condo fees.
Another building was told to brace for a 40% hike, but it turned out to be 300%.
Similar stories in Victoria are scant so far. But many of the 30,000 strata corporations in B.C. renew in the first few months of the year. Two thousand of them across B.C. are scheduled to renew on the same day, Feb. 29.
The finance minister is sticking to the same themes in responding. James is very concerned about the issue, which is spreading across Canada, and is meeting with various people, including lately the Finance Services Authority, which regulates insurance companies. “It’s important that we look at how we can address the affordability issues for the individuals concerned,” she said.
Ideas are coming in and the government recognizes the urgency and the pressure people are under.
So the government wants to do something, but hasn’t figured out what yet.
Opposition Liberals planted some ideas in a private bill Tuesday that calls for clearer definitions between insuring a unit and insuring the strata corporation’s building (where all the hikes are occurring) and more stringent insurance requirements.
They also want a strata water-damage prevention program to help with preventative maintenance in stratas.
But the hikes are more complicated than that.
Global reinsurers have taken major hits from natural disasters and are jacking up rates. Claims are increasing and getting more expensive, while competition has receded. Some buildings aren’t maintained properly or don’t budget long-term. Some companies bailed out of the market and only a handful now offer coverage of strata buildings.
But many of the insurance industry’s reasons for the rate hikes blame condo owners and occupiers. The government may recognize some of them as valid but is likely also looking at the industry itself, which brought attention on itself with the suddenness of the hikes.
It’s going to take some scrambling to get on top of the problem and it’s hard to see a quick route toward easing the rate hikes.