2022 Market Update – Strata
Strata insurance has experienced a significant rise in premiums over the past five years. Initially there were recurring increases of 5-10% – in the 2021 calendar year uplifts are between 10-50% .
- The ongoing issues regarding defects, in particular non-conforming building products as well as well documented design and construction defects (see our article here).
- Large losses as a result of Catastrophic Events.
- Poor risk management by owners’ corporations of established plans.
- Reluctance of owners corporations to hold higher excess structures.
- COVID-19 risk generally.
During the COVID-19 pandemic, many Owners’ Corporations (“OC”) have been unable to pay insurance premiums due to non-payment of levies by owners. Some OCs have moved toward Premium Funding to pay premiums.
We have strategized for our strata clients to benefit from a range of risk management initiatives so as to buck the market trends. In all, that has led to more moderate uplifts of between between 5-30% increase in premium across our strata portfolio.
We have observed a trend for some insurers seeking to increase market share in certain areas where others want to target a specific type of risk in their portfolio. This is becoming more prominent as we see lower premiums being offered where insurers seek to increase their market share, and higher premiums being charged when an insurer is looking to withdraw from less preferred strata risks. On that basis we consider our non-alignment with any particular insurer assists us getting the most appropriate pricing and cover for our clients.
We expect rates to stabilise but for larger plans they may still be susceptible to “capacity” issues for some time.
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