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Stricter regulations have put pressure on the insurance market. It’s now harder than ever to obtain condo insurance.

Navigating Stricter Regulations

The Surfside condo collapse in 2021 triggered calls for stricter regulations for condominium buildings. On May 26, 2022, Governor DeSantis signed Senate Bill 4D, which included reforms designed to increase condominium safety. The requirements were then amended with the passage of Senate Bill 154 in 2023. The new regulations require the following:

• Phase 1 inspections for all condominiums and cooperative buildings that are three stories or higher. Phase 1 inspections are required 30 years after initial occupancy and then every 10 years. Originally, there was a 25-year inspection requirement for buildings within three miles of the coastline, but SB 154 revises this to give local enforcement agencies the authority to determine whether inspections are needed at 25 years. SB 154 also clarifies that for buildings that reach 30 years of age before July 1, 2022, the building’s initial milestone inspection must be performed before December 31, 2024. For buildings that reach 30 years of age on or after July 1, 2022, and before December 31, 2024, the building’s initial milestone inspection must be performed before December 31, 2025.

• More intensive Phase 2 inspections for any buildings if Phase 1 inspections reveal substantial structural deterioration.

• Structural integrity reserve studies (SIRS) for condominium or cooperative buildings that are three stories or higher. Condo associations must use the SIRS as the basis of a budget adopted by January 1, 2025. For certain structural repairs, a waiver of funding is prohibited.

• Increased Transparency All structural inspection reports and reserve studies must be part of the association’s official record. This information must be provided to potential unit purchasers.

Associations Are Scrambling to Comply

Although new regulations may be necessary to prevent another tragedy like the one in Surfside, they are making things difficult for condo associations.

According to Construction Dive, the legislation’s inspection requirements go into effect in 2024 and the requirements for reserve funds in 2025. Experts say these new rules have created a huge financial burden for associations in the state. To make matters worse, thousands of condos are trying to comply at the same time – and there are only so many building inspectors to go around. A statement from the Florida Senate puts the number of condo associations at 27,588. Approximately 912,376 condos in the state are at least 30 years old.

The Impact on the Condo Insurance Market

Condo insurance rates are skyrocketing. According to WFLA, one condo association had its master policy spike by almost 1,000%. The 56-unit condo used to pay around $56,000 a year. Now, the annual cost has gone up to more than $500,000, and the policy only covers up to $2.5 million in damage per hurricane. The association got stuck with this policy after multiple insurance carriers declined to provide coverage due to the condo’s risk level.

Buildings considered less risky may receive better rates and coverage, but significant premium hikes are still likely. ABC Action News says these increased insurance costs are coming at the same time as increased inspection costs. As a result, condo associations may need to raise their fees six-fold.

Needless to say, condo owners are not happy. Insurance Journal says the police had to respond after hundreds of condo owners showed up to a meeting to discuss rising insurance premiums but were turned away, which led to chaos.

Navigating the Condo Insurance Market

This is a difficult time for condo associations and condo unit owners alike. However, proactive risk management can help you stay on top of the requirements.

• Understand your new legal responsibilities. If you serve on the board of a condo that is three or more stories high, you will need to comply with the new reserve and transparency requirements. You may need an inspection soon, depending on the age of the building. Since building inspectors are in high demand right now, don’t put the inspection off until the last minute.

• Make your building as attractive to insurers as possible. If your building has structural issues, most insurers may not be willing to insure it right now. The ones that will offer coverage will require large premiums for minimal coverage. If there are issues with your building, determine whether you could make repairs before your renewal. You should also keep up with maintenance.

• Prepare for price increases. Even if your building is in good condition, expect higher inspection and insurance costs. Associations need to be open about what is going on and help their unit owners prepare.

• Have an expert in your corner. In a market like this, you need an experienced insurance partner by your side. An insurance partner can help you explore coverage options you might not have considered, such as a parametric insurance policy to supplement your main policy. An insurance partner can also help you prepare your application to make it more appealing to insurance carriers.

Do you need help securing coverage for your condo association? Century Risk Advisors can help you navigate this challenging market. Contact us.