If you are a condo/co-op board member or a property manager you have likely become aware of the surging costs for insurance. In some instances, condo/co-op properties have seen increases of anywhere from 15% to 300% on their insurance costs for 2024. Geographic area, previous claim history and proximity to water are certainly triggers for increases but even the most ordinary condo or co-op properties are not immune to these rising costs.
The average increase to condo/co-op insurance the past decade has been between 3-5% annually but catastrophic losses and large claims have resulted in huge increases from the nation’s insurance carriers and a hesitation to even provide policies to some condo and co-op buildings. Recently we have started to see a trend by insurers to request a Reserve Study report prior to providing an offer of insurance to a board. As we are highly focused on the financial health of condo and co-op properties, this was, of course, an important topic to delve into.
As it turns out, a Reserve Study review provides key insights for insurers into a building’s finances, property condition, mechanical component condition and structural component condition. Along with the lending agencies like Fannie Mae and Freddie Mac, the Reserve Study has become a key barometer of how healthy a condo/co-op building is, and it is now being utilized to determine whether an insurer will offer insurance to a building or deny coverage entirely.
In addition to the reserve study being utilized to determine if a building is a good fit for an insurer, it also has become a great way for a carrier to determine risk. If a condo/co-op building is following a reserve study and doing repair, replacement and maintenance work on schedule and is amassing the appropriate amount of reserves to avoid a special assessment to unit owners, risk is reduced and therefore cost is reduced. There are reports of condo and co-op boards reducing their premiums by anywhere from 15% to 50% as a result of a reviewed Reserve Study outlining the mechanical, structural and financial health of a property.
This all makes sense. Managers and boards who are thoughtful about the financial, mechanical and structural condition of condo and co-op properties should get a discount. In the end, it reduces the number of claims and increases the value of units within the property.
At Strategic Inspections, our new Lender Property Analysis Reserve Study report clearly outlines the health of a condo/co-op association. It is the product we are most proud of as it ensures lending compliance and now, insurance compliance.
To obtain a quote to perform a Reserve Study on your condo/co-op building click here.
Orest Tomaselli is the CEO of Strategic Inspections, a nationwide reserve study provider. He is also the President of Project Review at Condotek, the nation’s leading condo and co-op lending compliance and technology firm.