With the tightening market, insurers are choosing what risks they take on, if any. Whilst it is required that Strata Schemes must have insurance in accordance with the legislation, it is not compulsory for insurers to provide a policy. It is becoming common that some buildings are left with reduced terms or no insurance.
What are the risks of no insurance?
As the contents of an owner’s property are not the responsibility of the strata committee, without insurance protection, all risks fall on the individual owners jointly and severally.
The treasurer is responsible for insurance if this job has not been delegated to the strata manager. A good strata manager will help find insurance and must provide three separate insurance quotations for consideration.
Not having the right insurance can put the strata at risk of not being able to pay for unexpected damage or legal costs.
What types of insurance are required?
- Building Insurance
- Public Liability Insurance
- Work Health and Safety Insurance
Insurance and capital works fund information required for annual reporting
The individual in your strata scheme responsible for reporting key information to NSW Government each year must report certain information from the AGM documents.
The capital works fund balance and insurance replacement value for the strata scheme are part of this information.
Building defects and cladding
Building defects are in the spotlight of the NSW Building Commissioner, who is bringing reforms and bylaws to bring back consumer confidence in the construction industry.
Building defects can have a serious impact by way of increased premiums, higher excesses, and policy exclusions.
For buildings with issues where no action has been taken, they may even become uninsurable. Timely rectifications are critical in order to maintain insurability for your building.
The insurance market for buildings with cladding, even if considered ‘safe’, is limited and premiums are high.
In NSW, Project Remediate is the ideal course of action in order to maintain insurance coverage.
WHS and fire compliance issues are deemed ‘high risk’
In NSW, the Work Health & Safety (WHS) Act 2011, covers a wide range of areas, including asbestos, confined spaces, hazardous chemicals and general safe work practices.
In residential buildings, it is the owners who are responsible for proactive duty of care to maintain the common property in good and serviceable repair and in accordance with the Strata Schemes Management Act.
By having a WHS Consultant perform regular WHS Reports, ensuring the health and wellbeing of resident and trades people who visit the site to complete work will assist in enabling insurance companies to view your building favourably, and enable you to negotiate better renewal terms.
In terms of fire safety, under the NSW Environmental Planning and Assessment Regulation, the building owner must choose an accredited fire safety practitioner to asses and verify their qualifications to perform to the required standard.
Insurers must be assured that high-risk items will be addressed as a priority for the safety of everyone in the building in order to comply with policy conditions, with all outstanding fire orders actioned promptly.
McCormacks summary and recommendations
In 2023, even well-maintained properties are seeing premium increases of up to 30%, and we see this trend continuing.
Insurance quotes are often based on an assessment of a building’s five-year claims history. The frequency of these claims, whether they are systemic issues and therefore indicative of inadequate maintenance or other preventative care.
If there are current, or potential problems, get ahead of the issues, as costs are sure to rise from there.
By being proactive and working with the team at McCormacks, we can implement strategies to address these matters before they become significant issues and create substantial insurance risks when it comes time for renewal to put your building in the best possible position.