Non-Wildfire Hazards Affect Association Insurability


Richard Williamson of San Lorenzo & Stadium Lofts Community Associations and Patrick Prendiville, CIRMS of Prendiville Insurance Agency


The ability of homeowners and homeowner associations to obtain, maintain, and provide insurance coverage at reasonable prices is becoming extremely challenging across the United States.


While the California insurance market has reacted in a very public way to claims for wildfire destruction and damage to homes and businesses, there are other significant threats to association insurability. One of the threats is beyond the influence of associations; the others are more manageable by community associations depending on actions taken or not taken to reduce risk of loss.


Who Insures the Insurers?


One of the largest threats to insurability is outside the scope of state insurance commissioners and legislatures. The insurance companies that insure the insurance companies with names we are familiar with have been subjected to significant losses over the last five or more years. These “re-insurers” spread large catastrophic losses nationally and,


and surplus markets that may charge any premium they believe is appropriate.


Has Your Association Been Deferring Maintenance to Keep Assessments Low?


in some cases, globally.


Across the USA, major damage from floods, hurricanes, winds, tornadoes, drought, and other weather-related events have caused losses for insurers and reinsurers that threaten the viability of the insurance industry itself.


Theremaining majorthreats to communityassociations insurability rangefromtotal associationcontrol


to limited


control that will reduce risk and maintain standard market non-high-risk insurance. Failure of an association to manage their controllable risks increases the probability that the board will have to purchase insurance from the excess


26 September | October 2024


For some associations, the board of directors has not raised assessmentsorraisedthemappropriatelyeventhough costs have increased year after year. One tool used to keep assessments low is to defer annual maintenance obligations and repair or replacement of reserve components on schedule. Deferring maintenance has several problems for an association. It makes the eventual repair or replacement more expensive for members when pushed into future years -- especially in construction cost relatedcomponents. Anditexposes the association and its insurer to increased risk of loss or personal injury or liability claims. Both insurance underwriters and lending underwriters are looking at deferred maintenance more critically – especially after the Florida condominium collapse. Preventive maintenance on roofs, roof vents, roof drains and gutters, landscape drains, corrosion control inspections on wrought iron and tubular steel fences, and other recommended maintenance activities will go a long way towards reducing repair and replacement costs and reducing insured risk.


Does Your Association Underfund its Reserve Replacement Fund?


Another path to not raising assessments is repeated underfunding of reserves or having an incomplete component list in theannualreserve study. Chronicunderfundingof reserves is also being looked at more closely by lenders. Risk


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32