The high insurance premiums that have rattled Ontario’s condo corporations are declining after years of substantial increases, but industry professionals are cautioning boards to remain vigilant about various insurance-related risks that can impact the financial health of their communities.
Roughly six years ago, insurers incurred severe losses, primarily from water damage claims. This led to annual premium increases of 20 to 40 per cent for about three consecutive years, higher deductibles, and fewer insurers who were willing to cover condominiums.
Chris Di Pietro, account executive at Selectpath Insurance, said now that insurers have become profitable again and more companies have entered the market, this renewed competition is driving costs down. “I believe rates are as low as they can get and they may stay this way unless insurers start becoming unprofitable and then the cycle starts again,” he said during a CCI Huronia webinar this past spring.
Not all condo corporations are realizing decreases. Older buildings with features such as aluminum wiring or fuse panels may see higher costs and limited coverage options. Besides condition, insurers also factor in a property’s location and claims history, and generally offer more favourable pricing to best-in-class condos.
According to Tom Gallinger, senior vice-president at Atrens Counsel Insurance Brokers, condos are still viewed as better insurance risks compared to apartment buildings because they have professional management, pride of ownership, and better overall maintenance standards.
“It’s a good time for insurance purchasers in the current marketplace because brokers are going to bat with the companies and are able, in a lot of cases, to secure competitive premiums for their clients,” said Gallinger. If premiums fall below what condos have budgeted for, he suggested investing those savings into additional safeguards, such as cyber coverage and higher liability limits.
But cost is only one part of the insurance equation. “It’s always important to take a look at the insurance companies that are backing up that premium and make sure you have some comfort and confidence in them,” he urged.
What to look for when purchasing coverage
Sandy Fantino, vice president, client executive and team lead at brokerage firm BFL Canada, explained that a corporation isn’t just buying a policy; it’s purchasing a long-term risk management service that goes beyond the bottom line and protects the corporation’s assets.
Insurance is often a condo’s largest operating expense, so naturally, unit owners expect their boards to secure the lowest premium. However, accountability also means education and following a strategic procurement process.
“Insurance decisions impact financial stability, claim outcomes, owner relations, and even director liability,” said Fantino. “As such, premiums should be viewed as only one component of the value.”
Boards should assess the overall insurance program through myriad factors, including the broker itself. A good broker shops for coverage among multiple companies, helps negotiate renewals, and provides ongoing advocacy and strategic guidance during disputes.
“A condo corporation insurance program is only as effective as the advice behind it, the clarity of the coverage, and the responsiveness during a claim,” said Fantino. “Claims are where insurance is truly tested and valued.”
When purchasing a policy, boards should ask: Who will interpret the coverage during a claim? Who will challenge denials, limitations, and depreciation? Who will coordinate with adjusters, engineers, lawyers and restoration firms?
Other elements to scrutinize are coverage gaps and wording. Policies often exceed 300 pages. Not all are created equal, so the “devil is in the details,” Fantino explained. Key areas where differences matter include, water damage and sewer backup limits, deductible structures, deductible buy-down options (worthwhile in unique circumstances), standard unit bylaw coverage, directors and officers enhancements, loss assessment coverage, equipment breakdown insurance and inflation and rebuilding cost provisions.
”Our role as a broker is to identify those coverage gaps, explain exclusions in plain language, and align coverage to the corporation’s governing documents and risk profile,” she stressed. Renewal strategies also matter. A broker can approach multiple insurers and create competitive tension in the marketplace, prepare boards for upcoming changes, and reposition any risks.
Boards and property managers should further expect brokers to educate them about policy changes, deductibles, owner communication, and how to integrate insurance with reserve planning and risk management. “Strong governance requires informed decision-making,” said Fantino. “This level of education is core to the broker’s responsibility.”
Resilience is key for good insurance budgeting
Over the years, condo insurance has transitioned from a routine annual expense to one of the most talked-about budget issues. Tricia Baratta, condo manager at Thorne Property Management Ltd. and a former broker, remembers how that conversation began to shift after catastrophic events like the 2016 Fort McMurray wildfire in Alberta. The fire totalled $3.58 billion, making it the most expensive disaster for insurers in the country’s history.
“We did start to see the impact here and there was that 30 per cent increase that happened overnight to our condo corporations,” she said. “They hadn’t budgeted for a potential shortfall and it took a long time to recover from that.”
When budgeting for insurance, she advises boards to value a long-term perspective. “One of the biggest mistakes I’ve seen boards make is budgeting solely based on last year’s numbers,” she said. “It’s more recommended to look back 3 years, 5 years, 10 years.”
Instead of simply adding a percentage increase, boards and managers can review the insurance history to identify trends in premiums, deductibles and claims. In many cases, the premium is the most visible part of a condo’s financial exposure; however, budgets should also consider hidden costs, such as deductible payments, mandatory appraisals, legal costs, and potential gaps in third-party claim recoveries. As Baratta cautions, subrogation doesn’t always recover the full replacement costs, even when another party is responsible for damage.
As the budget is compiled, a “stress test” is essential. “If your budget only works when everything goes right, then it’s not a very strong budget,” she maintains. Boards should ask whether the corporation could absorb a 20 per cent premium increase without creating a shortfall or imposing financial hardship on owners.
Doing so is yet another way to ensure the corporation is financially prepared for the unknown. Managers are also advised to contact their broker well before renewal and glean insight into market conditions that can be used during budget discussions.
“They’re not going to be able to tell you what your premium is in six months (there might be losses or a change in the market) but they can tell you right now, and you can rely on that information and feel confident going into that budget discussion with your board,” she said. “Good insurance budgeting isn’t about optimism. It’s about resilience.”
