Insurers have become increasingly reluctant to issue policies for aging condos in Florida following the failure of the state legislature to pass safety reforms, despite Surfside’s deadly collapse last year.
Insurers are pulling out of the high-risk market or raising rates, leaving associations in a bind, the Miami Herald reported. Experts fear that old buildings with problems will become completely uninsurable.
Associations in the market to renew policies are facing average premium increases of 30-50%, and in some cases 100% or more, said Mark Friedlander, director of communications at the nonprofit Insurance Information Institute. lucrative.
Associations must now stratify policies or turn to the less regulated surplus market, which is for associations that cannot obtain traditional underwriting. Robert Munchick, an insurance broker who sits on the board of his Miami condo, said the insurance market was “awful.”
“Insurance companies pick and choose which buildings they want to insure…companies might not want to write about the ocean anymore,” Munchick told the Herald.
Rising premiums and insurers exiting the market have long been a problem in Florida, but the situation worsened following the partial collapse of Champlain Towers South in June, which killed 98 people, and became a major issue after state lawmakers failed to approve tougher safety standards in their session that ended in March.
A Florida Bar Surfside task force has convened to offer advised safety recommendations for policy changes on four fronts: for inspection and maintenance regulations, as well as for more transparency and financial reserves mandatory for condos.
The Florida legislature accepted the principle, except on the proposal for the associations to strengthen the reserves within a given period. But ultimately, lawmakers did not pass the bill.
“Not passing this legislation sends a message of uncertainty, of indecision,” Bill Sklar, assistant professor at the University of Miami School of Law and chair of the task force, told the Herald. “That’s what the market doesn’t like.”
In Florida, there are more than 1.5 million condominium units, of which more than 922,000 are over 30 years old, according to state data that Sklar collected for the task force. More than 60% are in areas of the state that do not have maintenance or inspection standards.
As well as a tougher insurance market, homeowners and buyers also face tougher lending standards imposed in the wake of the collapse, as Fannie Mae and Freddie Mac now need information on the structural safety of buildings.
Some associations declined to answer questions, which ask whether a regulatory or inspection body had requested repairs due to unsafe conditions, The Real Deal reported in April. It’s upending offers and having a particular impact on first-time home buyers who already couldn’t afford escalating single-family home prices and record rental rates in South Florida, prompting them to look to the condos.
Ultimately, the tighter market for insurance and financing will mean more headaches for aging condo owners.
“Unit owners are going to be caught between a rock and a hard place when inspections show important work needs to be done,” Kyle Ulrich, president of the Florida Association of Insurance Agents, told the Herald. “They will either be in an uninsurable situation if they don’t make the repairs, or they make the repairs, and there will be a fairly large assessment for each owner.”
[Miami Herald] – Lydia Dinkova