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It is that time of year again whereby we release our annual insurance budget projections for our condominium and homeowners association clients. Just as we have done for the past 15+ years, below is a comprehensive explanation of our budget recommendation for the upcoming 2025 year. We are happy to report that by in large insurance premiums ended up clocking in less than the projections set last year. Our hope is that the premium stabilization/decreases will continue into 2025 as the market rebuilds from previous years losses and new carriers emerge in the Florida marketplace.
For our condominium and townhome communities (that insure the buildings like condominiums) the largest driver of the insurance costs is the property policy. The property insurance market in Florida began to improve in 2024 and appears it will continue to do so into 2025. Assuming no major hurricanes hit this storm season, we feel confident that 2025 renewals will either come in “flat” or even at slight decreases. Bear in mind that we are providing this budget guidance prior to the height of hurricane season which runs between August thru late October. Upon conclusion of storm season our team will release updated budget guidance to keep you and your boards in the loop.
Please take a moment to review the bullet points provided below to determine if any apply to your community. The items listed could materially impact pricing, so it is important to consider them when setting your budget.
The first two bullets provide our 2025 budget forecast for COA's and HOA’s, respectively. The remaining bullets discuss a range of factors that could impact premiums.
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Budget Outlook for Condo Associations & Townhome HOA's that Insure Like Condos: We suggest budgeting a 10% overall increase. While there will likely be decreases, we feel it is prudent to budget a slight increase due to the uncertainty of storm season.
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Budget Outlook for HOA's: We suggest budgeting a 15% overall increase. The reason is that with HOA’s the largest premium driver is typically the General Liability Policy. General Liability, along with the D&O and Umbrella policies, are lines of coverage that are hardening. Meaning that those coverages are becoming more expensive which is driving up the cost of insurance. The “property in the open” schedules (i.e., gates, walls, fences, light poles, etc.…) remain difficult to insure with wind so if that coverage is needed be aware that cost will also rise slightly.
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Heads Up - Items to Review that Could Potentially Increase Insurance Premiums Beyond Budget Recommendations: There are several factors listed that can negatively impact the insurance premiums charged. Please free to discuss with myself or Negar directly prior to formalizing your association’s insurance budget…
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Appraisal Updates: For 718 condominiums that have not had an appraisal within the past 36 months, you will be due for an update prior to the next renewal (required by 718 statute). Historically these appraisal increases have been about 3% per year, or roughly every 3 years appraisal cycle.
However, inflation has recently wreaked havoc on the economy driving up the cost of construction labor and materials by as much as double the previous appraisals cost. As an example of how appraisal values can impact premiums, if the renewal rate increases by 10% AND the property values increase by 30%, that is going to lead to a 40% increase in total premiums. The reason is that the premiums are based in large part on the limit being insured. The potential increase in values should be considered as it is an important factor in the total premium calculation.
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Claims Activity or Open Property Claims: Any significant property or liability claims will absolutely impact premiums. Especially if it involves an open roof claim from Irma or Ian that still has not been closed out and repaired. Most associations with open property claims will have to stay with the current insurance carrier until the claim is closed. Note in these cases the rate increases can be significant with minimal options. Any assault & battery claims or any larger liability claims upwards of $50K will put significant pressure not only on the general liability renewal pricing and terms but also the umbrella renewals. The umbrellas are getting hit just like the general liability and there is significant pulling back on that line of coverage as well (reduced limits, higher rates). If a claim gets on their radar, they can non-renew and the shift in carriers can add premium fast.
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Roof Covering Age: Roof covering age is the number one property rate driver. The newer the roof the lower the rate will be. What has been considered an acceptable roof age has changed over the years. Ranging from up to 20 years old several years ago to up to 12 years old in 2023. If your community has 15+ year old roofs this will likely be an issue at the next renewal. Carriers are also using creative ways to deal with older roofs such as adding actual cash value endorsements, higher storm % deductibles, prorated roofs schedules, etc.…
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Roof Replacements: If your Association’s roofs have been replaced since the last renewal, please notify our team so that we can update our files accordingly. This information is vital to us being able to negotiate the best rate possible.
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Building Age (Surfside Impact & SB 4D & SB154): This is a major issue for the 2025 budget. Any condominium building that is 3 or more stories, and 30 years or older, must have the Phase I visual structural inspection completed by the end of 2024. Property insurance underwriters are anticipated to start asking to review the inspection reports prior to quoting. Please communicate to your boards that not having these reports completed in time could negatively affect the availability of quote options.
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Association Location: It should come as no surprise that the closer to the coast and/or the further South the Association is located can cause larger property rate increases. We see this also impact the liability rates, especially in Tri County (Dade, Broward, Palm Beach). We have had more carriers pulling back from the Tri County area than anywhere else in the State. Barrier islands are also issues. Being located in these areas is an absolute factor.
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Developer Control: For any COA or HOA that is still in the course of development do not forget to account for the number of new units that will be built/completed by the end of the 2025-2026 policy term. The reason it is important is that the more units within a community the higher the premium will be. This also applies to any new amenities that are anticipated to be built prior to or during the next policy period. So, if you budget 15% over what you are paying in 2024, and 100 homes and a club house are added, the 15% is not likely going to hold up.
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Construction Defects: When an association has unrepaired defects, depending on the type of defects, this can usually reduce the pool of available carriers that are willing to offer a quote to the community.
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Defect Repairs: If your association has completed the construction defect work since your 2023 insurance renewal, please alert us as this can have a POSITIVE impact on the renewal premiums.
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Aluminum Wiring: If your association was built prior to the mid 1970’s, and you have unprotected aluminum wiring in your buildings, this condition severely restricts the insurance carriers that will offer quotes on your account which causes pressure on the predictions above. We STRONGLY recommend upgrading electrical systems (wiring & electrical panels). This is a major issue for older properties insurability.
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Restoration Projects: If your association is scheduled to do major exterior repair work for construction defects you should discuss it with us before budgeting. This needs to be properly disclosed to the insurance carrier and can cause pressure on predictions above. Remember that when construction work is done, and defects are repaired rates will return to where they would be for a normal association.
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High Value Property $50M or More: If your association has over $50M in TOTAL INSURABLE BUILDING VALUES please contact us for a personalized budget. The larger property values limit the property carrier options and can have different impacts on projections. This is not as big of a deal as it was last year, but it is still an issue for the associations pushing $100M+
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Hurricanes: At the time of this publication, there have not been any major hurricanes to hit Florida. As mentioned above, if one does materialize then the aforementioned budget projects will likely need to be amended. If a storm does not form, then we believe there is a strong possibility of premium decreases next year.
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Large Global Disasters: As we witnessed with the 2011 Tsunami in Japan or Super Storm Sandy in 2012 or the 9/11 Terrorist Attacks, large insurable events that occur outside of our Gulf Coast area can have an overall impact on market rates. A large earthquake, tsunami, flood, etc.… in a highly insured area anywhere on the globe can impact our future renewal rates on any insurance policy. The reinsurance carriers that provide our hurricane reinsurance here in Florida are providing reinsurance around the world so when large reinsurance losses occur it reduces the amount of reinsurance in the market thus driving up rates, supply vs. demand theory. Of course, the area that takes the largest loss has the most profound rate increases but everyone feels it.
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Governmental Interaction: Governments can pass laws, change rules, or impose assessments, fees, and taxes that that have impacts on the premiums we pay. This is even more relevant in recent years as CITIZENS has become a bigger player in the current condominium association market. Another good example is the FIGA fee (Florida Insurance Guarantee Association). Due to the carrier insolvencies, we noted above the State has had to implement multiple FIGA fees over the last year to recoup losses through FIGA, these fees add additional costs to the insurance program. These fees are passed through the carriers and collected for the State. They just add to the overall rate increase.
Any questions please do not hesitate to reach out anytime.
Your AP Condo Team,
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