Condo Owners Face Record-Breaking Insurance Premiums

Photo by Patrick Tomasso on Unsplash

At a time when severe weather is pretty much guaranteed, how high can insurance premiums rise before they become outright unaffordable? Chris Chopik, a realtor and expert on analyzing how climate change impacts real estate values, says every homeowner should be concerned.

“In the future, there is definitely an indication that heat waves in Toronto could be a problem,” says Chopik. “Let’s say we get twice as many humidex index warnings. Those are times when our power grid becomes susceptible to failure.” The blackout could mean people stuck in the upper floors of a high rise without power (or air-conditioning) – or access to an elevator. The situation can be life-threatening if you are a senior with mobility issues, turning your apartment into a veritable “solar oven”.

READ: Ask An Agent: How Does Climate Change Impact Real Estate In The GTA?

Climate change, in addition to rising construction costs, are forcing many insurers out of the market completely. While commercial insurance policies for condo buildings shouldn’t be confused with insurance policies for condo owners – literally every form of insurance is on the rise.

Take the case of British Columbia for example. In this province, condo buildings face premium hikes of between 50 per cent and 300 per cent. “Deductibles are going from the conventional $10,000 or $25,000 to $100,000, $250,000 or $500,000,” said Tony Gioventu, executive director of the Condominium Homeowners Association.

But Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada, says that unexpected weather events are the core problem.

READ: People Are Getting Caught In A Toronto Rental Scam, Here’s How You Can Avoid That

“There are more and more severe weather events that are resulting in more insured losses, things from wildfires to flooding,” he told HuffPostCanada, referencing the 2016 Fort McMurray fires as a “record-breaking event”. Add on to this the annual B.C. wildfires, the Ottawa regions massive floods and two tornadoes within the past two years and insurance companies are just generally overwhelmed with the numbers of payouts.

The payouts alone jumped between $1 billion and $2 billion in recent years, from around the $400-million range just five years ago, Karageorgos added.

As a result, many insurers simply refuse to cover condos – a trend that puts the condo resale market in jeopardy. The insurers who continue to cover condos can essentially justify the ridiculous premiums not just by referencing climate change, but by the high price of repairs. A shortage of skilled labourers plus the increased costs of materials are driving up those fees.

In one extreme example, a condo complex in Ottawa recently found its insurance premiums rising by 730 per cent because of wind and fire damage. And the increase has wreaked havoc on people’s personal lives.

READ: Ask An Agent: Should You Buy Or Sell First In A Real Estate Transaction?

“Some people are suicidal,” condo board president Marie Weerasooriya-Epps told CBC News. “Some people are headed for nervous breakdowns.”

While not every case is as extreme, rising insurance costs can take a bite out of property values. In general, the rule is that condo values are the inverse of monthly fees ― the higher the fee, the lower the resale value. Some condo buildings are on the brink of bankruptcy because of it.

“I think there will be a number of condos where those fees will become unsustainable and people will want to get out, and there’s a point at which it (all) becomes unsustainable,” said Randy Lippert, author of Condo Conquest.

Chopik says Toronto’s housing market might still be in denial about the whole thing: “I don’t think our industry knows what’s happening as far as how climate change impacts real estate…I think we are only a couple of lawsuits away from knowledge of climate change susceptibility.”

Necessity being the mother of invention, and so on!

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