Condo insurance premiums in British Columbia have surged by 40%, claims a new report from the B.C. Financial Services Authority (BCFSA), because calamitous events are of greater concern.
However, the preponderant reason premiums have risen is that only a few insurance companies share the risk. The greater the concentrations of risk, the greater the insurer’s exposure to a large claim, like fire or flooding.
“High-risk concentration negatively impacts insurers’ catastrophe models, reinsurance costs and credit rating assessments,” said the report. “As strata properties get more concentrated in both the number of units and physical proximity, especially in geographic areas with high catastrophic loss exposure, insurers will charge more for that exposure or reduce supply or both.”
Moreover, B.C. has an elevated risk of earthquake exposure, “especially the Greater Vancouver and Victoria regions, which are also the two largest strata property markets,” added the report. “
According to Ron Antalek, a sales agent with RE/MAX Lifestyle Realty, Vancouver’s older stock of strata buildings are responsible for accruing larger insurance claims that have, consequently, played a role in rising premiums.
“This has been an ongoing issue in B.C.,” he said. “Newer buildings haven’t been the issue; older buildings, rather than being proactive and doing a depreciation report with the strata group, left it and waited for claims and for insurance to fix everything.”
However, the proximity to California also plays an outsized role, added Antalek.
But as the BCFSA report makes clear, the province’s neighbours south of the border don’t have the same insurance outlays because their industry is managed differently.
‘B.C. shares many of the same risk exposures with California, Oregon, and Washington. Some of these risks are natural, such as wildfire and earthquake risk, but also urban growth concentration. However, while those markets have not seen the same type of percentage increases as the B.C. market, they are also facing the same issues. The U.S. insurance market is managed very differently than the B.C. market.”
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