The insurance market for condos has always had its challenges with limited appetite in the marketplace to begin with but the post-COVID environment has been especially challenging, according to Brian Davidian, executive vice president, casualty at RT Specialty LLC.
The overall property/casualty market continues to see hard market conditions. At the same time, carriers are seeing upticks in claim frequency and severity, including worker injury claims and construction defect lawsuits. “The frequency and severity of these claims and payouts are greater than ever before, forcing carriers to react in real time,” Davidian said.
Challenging legal environments such as Florida and California add to the severity and frequency of claims on condo projects and drive up the cost for all parties involved. In addition, contractors are faced with material and supply shortages, ongoing labor shortages in construction, and project delays and restrictions. All of which has led to an even more difficult market for building and insuring condo projects nationwide, Davidian added.
The marketplace outlook for OCIP/CICP condo insurance is a very challenging nationwide but certain regions are more difficult, he added. “In Florida, for example, where there seems to be more high-rise condo construction going on than anywhere in the country, insuring an OCIP with adequate limits can be as high as 5% of costs,” he said. “Compare that to 1% or lower five-plus years ago.” He says carriers have cited soils issues, construction defect allegations and worker injury/action over claims as large drivers of claim activity for condo projects in Florida.
“In Illinois and California, there are some carriers who have stopped writing OCIPs/CCIPs all together, citing worker injury claims that would have traditionally been paid out by workers’ comp,” he said.
Despite all the challenges, Davidian says he’s still having success insuring condo projects of all sizes but it does take longer to put the programs together.
“Carriers are being more selective of the risks and putting more risk control and engineering behind their underwriting reviews with things like geotechnical reports and QA/QC programs being reviewed by third party experts the carriers retain,” he noted.
He advises that agents and brokers come to the table with great submission information, risk controls, quality control and quality assurance plans. That will help push those deals to the top of the stack.
“And of course partnering with the right broker with expertise in the space always helps too,” he said.