Are Condominium Association Insurance Premiums going up?

Condominium Associations

Does your state have an Insurance and Real Estate Committee as part of its state government? Unless you are a big fan of state government or have had to appear before this gathering of legislators, chances are you may not know anything about this important group of lawmakers. In my state, this committee is comprised of 19 members of the State Senate and House of Representatives. Collectively, their mission is to “have cognizance of all matters relating to insurance law and real estate law”.

In 2007, Robert Hartwig, Ph.D., who is the President and Chief Economist of the Insurance Information Institute, made a formal presentation to members of this committee. While his presentation contained some standard fare of the importance of a financially strong insurance industry, his presentation was also loaded with a hefty dose of hurricane and coastal erosion risk and vulnerability analysis. The latter has gotten my attention as I feel it will have a direct effect on condominium association premiums for all coastal communities in the very near future. Dr. Hartwig has given a good synopsis of what you need to know.

During his presentation of recent catastrophic disasters throughout the country, he cited 2005 as the worst year ever for insured catastrophe losses but that the forecast is that THE WORST IS YET TO COME! Hurricanes alone are not the only culprit. Tropical Cyclone Activity has been reported in many states and with an increase in those reports comes an increase in the likelihood that there will be more. That’s not good news for anyone who has to purchase condominium association insurance for their community. It is also bad news for residents of those communities who will most certainly bear the brunt of the increased premiums that are sure to follow news like this.

Dr. Hartwig’s presentation then focused on coastal exposure. Any state with an exposure to water is considered coastally exposed and in a greater “risk of claim” pool that the insurance industry uses to calculate risk and, ultimately, premium. Add to that our expensive real estate prices and many states are at big financial risk, to the tune of hundreds of billions of dollars worth of real estate.

Of course, Dr. Hartwig’s presentation was not all gloom and doom. His expert opinion was sought to help legislators get a better grip on what factors are causing condominium association insurance rates to raise. The reality of a direct hurricane strike in any single community is relatively low, although there is always a possibility for catastrophe. The reality of an increase in claims due to Tropical Cyclone Activity is very real to insurers who must weigh the increased severity of storms with sustained winds and the claims for the monetary damage they can cause.

My advice to community leaders is to get out in front of this trend. Use your condominium association newsletter to tell the story of what the experts are saying and work closely with your condominium association insurance provider to develop a realistic budget for your condominium association insurance needs. Since the rates are likely to be going up substantially, communicate with your residents the need to set aside the funds to pay for those increases. While asking for more money is never a popular strategy, the need to do so is very real and you are already armed with the knowledge that these increases are coming. It is just a matter of time before your community will bear it extra burden of increased insurance premiums.

(Editor’s note – For more information on the Insurance Information Institute, please visit their website at

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