The BC government is taking its first steps to mitigate soaring strata insurance costs by introducing a bill to amend the Strata Property Act and Financial Institutions Act. 

The government wants to make the strata insurance industry more transparent, close depreciation report loopholes, and end referral fees paid to property managers, while giving strata councils more tools to deal with insurance. 

If passed, the changes will: 

• end the practice of referral fees between insurers or insurance brokers and property managers or other third parties; 
• set out clear guidelines for what strata corporations are required to insure to help strata councils make informed decisions on their insurance policies; 
• require strata corporations to inform owners about insurance coverage, provide notice of any policy changes, including increasing deductibles, and allow stratas to use their contingency reserve funds when necessary to pay for unexpected premium increases – this was recommended by the Real Estate Board of Greater Vancouver (REBGV) and the BC Real Estate Association (BCREA); and 
• protect strata unit owners against large lawsuits from strata corporations if the owner was legally responsible for a loss or damage, but through no fault of their own. 

The new legislation will also give the government the ability to: 

• identify when stratas are not required to get full insurance coverage; 
• strengthen depreciation reporting requirements, including limiting the ability to use existing loopholes in the legislation to avoid completing depreciation reports; 
• change the minimum required contributions made by strata unit owners and developers to a strata corporation’s contingency reserve fund; 
• require brokers to disclose the amount of their commission, which has been reported to be at times in excess of 20%; 
• strengthen notification requirements to strata corporations of changes to insurance coverage and costs, or an intent not to renew – this was recommended by REBGV and BCREA; and  
• amend the Form B Information Certificate – this was recommended by REBGV and BCREA. 

Consultation with REALTORS® 

The government specifically named BCREA, which represents Realtors across the province, as a key stakeholder in the creation of the new legislation. 

Since February, Realtors have made recommendations to the provincial government to help deal with rising insurance costs. 

BC Financial Services Authority report

The BC Financial Services Authority (BCFSA) found strata insurance premiums rose by approximately 40 per cent, with deductibles seeing triple digit increases over last year across the province according to their interim report released on June 16. 

These increases are having a widespread impact on BC – nearly one in three British Columbians live in a strata property. 

We’ll provide more information on this report in the coming weeks. 

Changes to strata regulation 

An addition to the Strata Property Regulation (BC Reg. 43/2000), made through an Order in Council on May 29, 2020, may make life easier for strata corporations grappling with sky-high insurance premiums. 

Strata corporations can now fund insurance premiums from their contingency reserve funds without a three-quarters approval vote. 

Read more. 

REALTOR® recommendations 

Vancouver's Real Estate Board worked with the BC Real Estate Association, and the other 10 boards in the province, to develop recommendations for the BC government that, if implemented, would help deal with the issue: 

Short-term recommendations: 

1. Amend the Form B Information Certificate to require proof of insurance, including premiums, deductibles, coverage and expiry date. 
2. Work with the insurance sector to put measures into place that assure all strata corporations are able to obtain insurance coverage, for as long as the difficult market conditions last. 
3. Engage with insurers so they continue to provide coverage to strata corporations. 
4. Amend the Strata Property Act to require a strata corporation to inform owners and tenants of any material change in insurance coverage, including an increase in any deductible, as soon as feasible. 
5. Require insurers to provide strata corporations with notices 60 days before their policies expire or will be cancelled. 

Long-term recommendations:  

1. Encourage the provincial insurance regulator, the BCFSA, to make public the data and information it is gathering from insurance companies to better understand the current climate of expensive strata insurance. 
2. Encourage the BCFSA to foster a robust, economically viable market that attracts insurance providers. 
3. Develop mandatory education for strata council members. 
4. Either create a new organization – modeled on the Condominium Authority of Ontario – to enforce the Strata Property Act, including providing mandatory training and creating best practices for strata councils, or assign this role to the Ministry of Municipal Affairs and Housing. 

Why are insurance rates increasing? 

Strata building insurance premiums are increasing for a variety of reasons, according to the insurance industry. These include an increase in the number of claims, in the cost of repairs and rebuilding, and in the growing number of strata developments. Many strata buildings date back to the 1970s and ’80s and strata owners may be reluctant to undertake major system upgrades until problems occur. 

What's the impact on the housing market? 

The most affordable homes in Metro Vancouver are strata units. Drastically increasing insurance rates negatively affects housing affordability.  As well, some strata corporations are struggling to find insurers willing to cover their building, making them non-compliant with the Strata Property Act. This means these units can no longer be bought or sold.  This is adding uncertainty and risk into the market and the economy at large.