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Magnum York hosted a webinar with special guests; Lesley Desmarais from BFL Canada and Pete West from Go West Valuations Corp to discuss the current state of condo insurance in Alberta in 2021 and how it impacts your Condominium Corporation and Owners.
First, we would like to thank our 100+ attendees for taking the time to tune in, as well as Lesley and Pete for sharing their industry knowledge with our valued clients. Now, to recap…
Pete West joined as one of our special guests and highly regarded vendor. With a team of fully licensed appraisers and CEO of Go West Valuations Corp, Pete shared how important it is to obtain an insurance appraisal by a qualified and designated appraisal company, to ensure your complex is accurately insured. We break this down in more detail in our recent guest blog post with Go West Valuations.
Why get an appraisal?
- Independent verification of the amount the complex should be insured for.
- 100% insured – No co-insurance clause.
- Accurate premiums – clients not overpaying.
- Year-on-year accuracy.
- A clear description of all insurable components.
“We’ve had very aggressive increases in insurance over the last year or two. What an appraisal does, it makes sure you are covered accurately and therefore your premiums are accurate which saves you from paying too much”Pete West – Go West Valuations Corp
What is covered in a reconstruction appraisal?
After a loss, there are a number of different things that make up an exact insured amount to rebuild.
- The first amount you have in a reconstruction appraisal and the most important is the building improvements. These are apartment buildings, townhouses, parkades, garages, and anything that is built on the site.
- Another insurable component is the site improvements. These include hard and soft landscaping, roadways, fencing, trees, signage, and lamp posts.
- An allowance for demolition/debris removal must be included in an insurance appraisal. The very first amount that would be deducted from an insurance policy after a loss would be the cost of removing the debris. Then you would get to rebuild using what is remaining from the insurance policy.
- If applicable, better and improvements would be included, if it is stated in the bylaws that the Corporation is responsible to insure upgrades in the units.
How often is an appraisal needed?
Appraisal cycles are typically on a 3 year basis. It does depend on the bylaws, as some may dictate that they need to be done annually. A full appraisal is generally done once every 3 years, with updates being completed in the intervening years.
What is the importance of appraisal updates?
Most appraisers will start with an initial appraisal, which will be an in-depth document provided to the Corporation. At Go West Valuations Corp, free updates are provided for the two years following the full appraisal report. During these update appraisals, the focus is to update the value and cost of the building materials for reconstruction. This includes the cost of wood, concrete, copper, labor rates, etc. This allows for accuracy that the insured value is consistent with the market cost for reconstruction.
Appraisal updates are important to ensure that new construction codes, fire codes, and new bylaws are adhered to, which could affect the cost of a rebuild. For example, in 2015 when the new National Energy Code for buildings was put in place, this added an additional cost that had to be accounted for in the appraisals.
What is a SIUD?
SIUD stands for Standard Insurable Unit Descriptions. As of January 1, 2020, Service Alberta has mandated that all condominiums need to obtain a SIUD. They provide in-depth details on the standard interior unit finishes, fixtures, and built-in components of the complex.
“SIUD’s came into effect to clearly illustrate what the Corporation is responsible for verse what the individual owner is responsible for in a post-loss claim”Pete West – Go West Valuations Corp
Where do we stand in 2021 in terms of insurance appraisals?
Pete West discusses the status of 2021:
Lesley Desmarais, client executive in the real estate division of BFL Canada joined to provide an update on expected insurance changes for 2021. BFL is the largest employee-owned and operated insurance brokerage in Canada and has been a longstanding preferred vendor of Magnum York.
What was the 2020 overview when it comes to insurance claims?
Claims are still on the rise in 2021, due to the costly year in 2020. There were approximately $2.4 billion in insured losses in 2020 across Canada, in which Alberta made up 80% of the losses that occurred. Most of these claims were weather-related, causing catastrophic losses. The biggest claims stemmed from the fires, hail damage, flooding, and wind storms.
What is the 2021 trend so far?
There have been significant rate increases over the past 6 months, that were unexpected as average losses are continuing to rise. When losses occur, they are resulting in $50,000+ claims, which is attributed to the cost of repairing and replacing increases as mentioned by Pete West.
What can we expect for the rest of 2021 for Condominium Insurance?
“1 in 3 condominiums will have a claim, according to the trends that have been set. Over 54% of losses have been over $100,000, which is significant. Wood frame apartment-style structures continue to have the highest claim history”Lesley Desmarais – BFL Canada
Industry leaders expect that there will be a continuation of increases until at least the 3rd quarter of 2021. Pricing challenges are likely to persist, especially if buildings are prone to poor claims history, flood exposure, etc. Increased rates and higher deductibles are likely to continue in 2021 but should not be as high as they were in 2020 since insurers now have a better idea of the trends.
Will insurance companies ever reduce their rates?
Even if we have a period of time with no fire or weather damage claims, we aren’t going to see a reduction in rates until insurance companies begin to see growth. Insurance does work on a cycle but it’s difficult to predict when the soft market will happen.
How long does an insurance claim stay on file for a Corporation?
Insurance claims remain on file for 5 years. When it comes to renewals, insurers typically look at what the cause of the loss was. If it was weather-related, that is out of the control of the Board so is taken into consideration. If it’s a failure due to neglect, such as lack of maintenance, that is also taken into consideration. It’s important for Boards to take steps in improving and mitigating losses.
- Go West Valuations Corp: https://www.gowestcorp.com/
- BFL Canada: https://www.bflcanada.ca/
- National Energy Code for Buildings (NECB): https://www.alberta.ca/assets/documents/ma-national-energy-code-for-buildings-overview.pdf
- Guest Blog Post: Go West Valuations Corp on Appraisals To Ensure Accurate Insurance Premiums for Condominiums
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