Strata insurance premiums have continued to surge since 2020, and it doesn’t look to be slowing down as the 2023 market is predicted to worsen before any improvements are seen.
What is happening in the current market?
Strata is continuing to experience a hardening* insurance market, with premium rises accelerating in the last 18 months from 15 – 30% to 20 – 50%. This increase is driven by both the internal risks involved in the strata market as well as external factors such as higher regulatory distribution costs, reinsurance costs, claims cost inflation, and catastrophic events.
These premium increases are expected to continue rising over the next 24 months.
What is driving the continued premium increases?
Cost of reinsurance
Reinsurance is basically insurance for insurance companies. It is a practice in which one company transfers a portion of its risk to another company. This allows an insurance company to protect itself from large or unexpected losses by spreading the risk among multiple parties.
claims impact on premium
Strata Claims are increasing due to the occurrence of severe weather events and disaster in 2022. This has led to a depletion of insurers premium pool as the number and cost of claims have increased, leading to an increase in Strata premiums and additional excesses.
Continued Growth of Strata Developments
The demand for apartment living continues to rise, and as a result, the construction industry has been under pressure to keep up with demand. This has resulted in properties being hastily built with numerous defects from the outset. Because of this, insurers remain cautious and limited in their willingness to insure new developments.
How you can prepare for the 2023 Insurance Market
Building Maintenance and Upkeep
Taking proactive measures to maintain your property and prevent defects can make a significant difference when approaching insurers in the current insurance market. If your building is already suffering from defects or a lack of maintenance, it’s recommended to maintain ongoing communication with your insurer through your broker to prevent negative insurance implications.
Budget Appropriately
The insurance market is predicted to remain hard for a considerable time, with insurance premiums expected to continue to rise over the next 24 months. Insurers are recommending that owners corporations increase their insurance budgets by 30 – 50% to allow for the current market predictions.
